The two leading U.S. manufacturers of high performance radia…

The two leading U.S. manufacturers of high performance radial tires must set their advertising strategies for the coming year. Each firm has two strategies available: maintain current advertising or increase advertising by 15%. The strategies available to the two firms, G and B, are presented in the payoff matrix below.   The entries in the individual cells are profits measured in millions of dollars. Firm G’s outcome is listed before the comma, and Firm B’s outcome is listed after the comma. a) Which oligopoly model is best suited for analyzing this decision? Why? (Remember it is illegal to collude in the United States.) b) Carefully explain the strategy that should be used by each firm. Support your choice by including numbers.

Traditionally, the federal government provides disaster reli…

Traditionally, the federal government provides disaster relief funds to flood victims so that they can rebuild their homes after a major flood. However, the government has recently denied requests to rebuild some homes that were situated in flood-prone areas. This action represents an attempt to ________ the moral hazard problem associated with building private homes in risky areas

Consider the following payoff matrix for a game in which two…

Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model:   Firm B cuts Firm B colludes Firm A cuts 6,6 24,0 Firm A colludes 0,24 12,12 Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm’s market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game?