# Econ2 HW3
\
1.
(a)
An association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.
(b)
The pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market.
2.
( a )
To buy in goods at a lower price.
( b )
The owner is better off with lower players' salaries.
( c )
A salary top is needed to restrict rich clubs from entrenching dominance by signing many more top players than their rivals and ruin the competitive balance.
3.
( a )
High tariff for the U.S. makes it better off no matter what the Mexican tariff is. Similarly, high tariff is also the dominant strategy for Mexico.
( b )
Nash equalibrium is the outcome when each player's strategy is optimal when considering the decisions of other players. High tariff is the Nash equalibrium for trade policy.
( c )
Yes, by signing an agreement the two countries can be both better off with respect to the nash equalibrium.
( d )
Yes, low(or zero) tariff is the most optimal option for the society(the two countries) as a whole. Solely lifting a country's tariff will increase competitiveness of its own industry while both countries enforcing high tariffs resluts in inefficient loss in trade.
4.
( a )
No. If Dynaco is having a large budget, Synergy will be better off if it also has a large budget; however, if Dynaco is having a small budget, Synergy will be better off if it also has a small budget.
( b )
Yes. Dynaco will be better off if it choose to have a large budget no matter what the decision of Synergy's is.
( c )
Yes. The nash equalibrum will be that the two firms both have large budgets, since no one single firm can benefit from solely altering its own decision.
5.
( a )
( b )
Either firms will be better off if they set the price at $300 no matter what the opponent's price is. The nash equalibrium is that the two firms both charge $300.
( c )
If both firms charge $600, it would be better off for both of them. This outcome can be achieve by colluding. Customers will be the losers of the colluding.
6.
( a )
( b )
Taking the drug will be the nash eqaulibrium for $X<5000$
( c )
Say that the cost of drug goes from $X$ to $X'$:
[I]
If $X>X'>5000$, the both nash equalibriums are to not take drugs. The outcome is the **same**.
[II]
If $X>5000>X'$, the nash equalibrium shifts from not taking drugs to taking drugs. The outcome of both athletes are **worse off** by $5000-(5000-X')=X'$
[III]
If $5000>X>X'$, the both nash equalibriums are to take drugs. The outcome of both athletes are **better off** by $(5000-X')-(5000-X)=X-X'$