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Discussion Question 8: In what way does OPEC resemble a cartel? How
successful was it?
Problem 1: Find the Herfindahl index for an industry composed of (a)
three firms—one with 70 present of the market, and the other two with
20 and 10 percent of the market, respectively; (b) one firm with a 50
percent share of the market and 10 other equal-sized firms; (c) 10 equal-
sized firms.
Problem 5: Starting with the reaction functions of duopolists A and B
from Problem 4, find the Cournot solution algebraically.
Froeb and McCann's Chapter 10:
a) Individual problems: 10-4.
Individual problem 10-4: Examine the US passenger airline industry
using the Five Forces. Is this an attractive industry? Why or why not?
Salvatore’s Chapter 11:
a) Discussion Questions: 12 and 13.
b) Problems: 2, 6, and 10.
DQ11: Do the duopolists in a Cournot equilibrium face a prisoners’
dilemma? Explain.
Discussion Question 12: How did the 1971 law that banned cigarette
advertising on television solve the prisoners’ dilemma for cigarette
producers?
Discussion Question 13: (a) What is the meaning of tit-for-tat in game
theory? (b) What conditions are usually required for tit-for-tat strategy to
be the best strategy?
Problem 2: From the following payoff matrix, where the payoffs are the
profits or losses of the two firsts, determine (a) whether firm A has a
dominant strategy, (b) whether firm B has a dominant strategy, (c) the
optimal strategy for each firm, and (d) the Nash equilibrium, if there is
one.
Problem 6: Explain why the payoff matrix in problem 1 indicates that
firms A and B faces the prisoner’s dilemma
Problem 10: Given the following payoff matrix, (a) indicate the best
strategy for each firm. (b) Why is the entry-deterrent threat by firm A to