Assignment:
1.)So what is Game Theory and how do businesses uses games? Here is some help from
https://cdnapisec.kaltura.com/index.php/extwidget/preview/partner_id/956951/uiconf_id/38285871/entry_id/1_x4lxfbpw/embed/dynamic
In the text, we consider a sequential-move game in which an entrant was considering entering an industry in competition with an incumbent firm (See Figure 15-1). Consider now that the entrant, if fought, has the possibility of withdrawing from the industry (at a loss of 1 for the entrant and a gain of 8 for the incumbent), or staying at a loss of 5 for each player). What is the equilibrium of this game? Discuss if the entrant is better off with or without the ability to withdraw.
2.) Suppose your company runs a shuttle business of a hotel to and from the local airport. The costs for different customer loads are:
1 customer: $30
2 customers: $32
3 customers: $35
4 customers: $38
5 customers: $42
6 customers: $48
7 customers: $57
8 customers: $68.
What are your marginal costs for each customer load level?
|
Q
|
TC
|
MC
|
Total Rev
|
Profit
|
|
1
|
30
|
|
10
|
-20
|
|
2
|
32
|
[a]
|
20
|
-12
|
|
3
|
35
|
[b]
|
30
|
-5
|
|
4
|
38
|
[c]
|
40
|
2
|
|
5
|
42
|
[d]
|
50
|
8
|
|
6
|
48
|
[e]
|
60
|
12
|
|
7
|
57
|
[f]
|
70
|
13
|
|
8
|
68
|
[g]
|
80
|
12
|
3.) Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both.
Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below.
The cost to Time Warner is $1 per customer for licensing fees.
Preferences
|
|
Showtime
|
History Chanel
|
|
Customer 1
|
9
|
2
|
|
Customer 2
|
3
|
8
|
Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making Showtime-History bundle available for $13. Should it use mixed bundling. i.e., sells products both separately and as a bundle?
Your answer must include the profit with mixed bundling.