Problem Set 4
Name:______________________________________________

Problem
Set 4 is to be completed by 11:59 p.m. (ET) on Friday of Module/Week 8.

1.
Movies
are distributed in a variety of forms, not just first run theatrical
presentations. What other ways are movies distributed? What are the different
price points? Using this information, draw a fully labeled graph of the market
for movies in which the distributor of the film price discriminates. (NOTE: This
should not be perfect price discrimination.)

2.
Assume
the following game is played one time only. Based on the information in the
payoff matrix, PNC Bank and Citizens Bank are considering an implicit collusive
agreement on interest rates. Payoffs to the two firms are represented in terms
of profits in thousands of dollars:

Citizens Bank

Collude: Raise Rates

Defect: Keep Rates where they
are

PNC

Collude: Raise Rates

(900,
600)

(700,
800)

Defect: Keep Rates where they
are

(1100,
300)

(800,400)

a. Does
PNC have a dominant strategy? What is it? Does Citizens have a dominant
strategy? What is it?

b. Does
the result of your answer change if the game is played an infinite number of
times? Why or why not. Properly use game theoretic terminology in your answer.

3. What is the profit maximizing output
of the monopolist shown below? _____________

What price do they set? _______________________

What is the mark up over cost? _______________________

Why will this price not fall?

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4.
Draw
the cheese market for the United States showing the world price as the price
for this market. How much cheese does the U.S. import at the world price? Now
assume that the cheese lobby promotes and successfully gains a tariff on
cheese. What happens to the price paid by cheese lovers in the U.S.? How does
this change the value generated by the market? Why do you say this? Where does
this appear in your graph?Problem Set 4Name:______________________________________________Problem
Set 4 is to be completed by 11:59 p.m. (ET) on Friday of Module/Week 8.1.
Movies
are distributed in a variety of forms, not just first run theatrical
presentations. What other ways are movies distributed? What are the different
price points? Using this information, draw a fully labeled graph of the market
for movies in which the distributor of the film price discriminates. (NOTE: This
should not be perfect price discrimination.) 2.
Assume
the following game is played one time only. Based on the information in the
payoff matrix, PNC Bank and Citizens Bank are considering an implicit collusive
agreement on interest rates. Payoffs to the two firms are represented in terms
of profits in thousands of dollars: Citizens BankCollude: Raise RatesDefect: Keep Rates where they
are PNCCollude: Raise Rates(900,
600)(700,
800)Defect: Keep Rates where they
are(1100,
300)(800,400)a. Does
PNC have a dominant strategy? What is it? Does Citizens have a dominant
strategy? What is it?b. Does
the result of your answer change if the game is played an infinite number of
times? Why or why not. Properly use game theoretic terminology in your answer. 3. What is the profit maximizing output
of the monopolist shown below? _____________What price do they set? _______________________What is the mark up over cost? _______________________Why will this price not fall?.gif”>4.
Draw
the cheese market for the United States showing the world price as the price
for this market. How much cheese does the U.S. import at the world price? Now
assume that the cheese lobby promotes and successfully gains a tariff on
cheese. What happens to the price paid by cheese lovers in the U.S.? How does
this change the value generated by the market? Why do you say this? Where does
this appear in your graph?