1.Samsung and Apple are two major producers of smart phones. Are these firms guaranteed to make high profits since they are the two largest firms in terms of market share in the industry? Explain.
2. Suppose Microsoft is considering developing a new generation of the Xbox with a new high-speed processor.However, it wants to do so only if Electronic Arts develops new video games that use the new high-speed processor of the new Xbox. Otherwise the new Xbox will not sell. Electronic Arts, in turn, wants to develop new Xbox video games only if the new Xbox has a faster processor. Is this a game of competition or coordination? What is the equilibrium?
3.Coke and Pepsi are going to play a game three times. During each game, if they both select a low price or a high price, their market share stays the same. But if one selects a low price while the other selects a high price, then the one with the low price gains market share while the one with the high price loses some market share. Based on this information what is the most likely outcome ofthe first game, the second game and the thirdgame?
4.Two basketball players, Jenny and Marcia, are the best offensive players on the school's team. They know if they "cooperate" and work together offensively- passing the ball to each other, providing screens for the other player etc.-they can each score 12 points. If one player "monopolizes" the offensive game, while the other player "cooperates," however, the player who monopolizes the offensive game can score 18 points, while the other player can only score 2 points. If both players try to monopolize the offensive game, they each score 8 points. Refer to the payoff matrix for the players below. If the players play only once, what strategy do you expect the players to adopt? If the players expect to play in many games together, what strategy do you expect the players to adopt? Explain.
