1. Game :  Price decrease: More Favorable Condition

Apple

No change in price                                           Price: Decrease

(.71, 1.6)

(-.4, 1.9)

(1.3, .2)

(.39, .8)

No change in

Price

Microsoft

Price

Decrease

a. Identify each firm's dominant strategy. Identify the Nash equilibrium.

b. There is a better solution for both companies if they fix the price (co-operative- not independent). Identify that better solution. 

2. Explain the three scenarios (profit-loss-shut down) associated with the ATC, AVC benchmarks and the MR=MC criteria in a purely competitive market

3. Why is the Game theory a good model to simulate the oligopoly market? What are the advantages of this game theory approach to understand Oligopoly.