strategic choices facing consumers
strategic choices facing consumers, The strategic choices facing consumers and producers of a certain good are presented in the payoff matrix below. Produce high-quality goods Producers Produce low-quality goods Consumers Buy Not buy $1,000 for producers $500 for consumers -$1,000 for producers $0 for consumers $1,500 for producers -$500 for consumers -$500 for producers $0 for consumers a. Is there a dominant strategy? There is for producers but not for consumers. There is neither for producers nor for consumers. There is for both producers and consumers. There is for consumers but not for producers. Is there an equilibrium? . b. If consumers and producers are free to negotiate with each other to find a better solution for all involved parties, what difference would we see if producers provide a 10-year limited warranty on the good. Assume that the warranty would mean a reduction in the payoff for producers in the amount of $600 and an increase in the payoff for consumers in the amount of $600 when both producers produce and consumers buy the low-quality good. No other changes take place. Construct a new payoff matrix based on this warranty agreement. Instruction: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Produce high-quality goods Producers Produce low-quality goods Consumers Buy Not buy $ for producers $ for consumers $ for producers $ for consumers $ for producers $ for consumers $ for producers $ for consumers Is there a dominant strategy? There is for producers but not for consumers. There is for consumers but not for producers. There is neither for producers nor for consumers. There is for both producers and consumers. The new equilibrium is: -$500 for producers and $0 for consumers. -$1,000 for producers and $0 for consumers. $900 for producers and $100 for consumers. $1,000 for producers and $500 for consumers. c. The new equilibrium represents an improvement for .
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