What is meant by the first-mover advantage? How does commitment matter in a game with a first-mover advantage? a. Some games have a first-mover advantage and others do not. Suppose you were playing rock-paper-scissors as an extensive form game

First you choose rock, or paper, or scissors and then your opponent makes a choice. Is there a first-mover advantage in this game? b. Two firms are thinking of entering a new market. If only one enters, it will make high profits. If two firms enter, then both will suffer losses. Suppose that the game is played sequentially, with Firm 1 deciding first. Does this game have a first-mover advantage?


A player can have a first-mover advantage in a game that is played sequentially rather than simultaneously. The sequential game features a first-mover advantage if, in equilibrium, the first mover earns more benefits than the second mover. However, not all games will have a first-mover advantage. A commitment is an action that one cannot turn back on later, even if it is costly. Using backward induction, we can choose the strategy that is optimal given the other player's actions. However, a commitment device would be needed to ensure that the other player sticks to his or her strategy when push comes to shove.
a. No. You will choose either rock, paper, or scissors. Your opponent will see your move, and she can take advantage of your decision when it is her turn.
b. Yes. The firm that goes first can enter; the firm that goes second will then have no incentive to enter.

Economics

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An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.

A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease

Economics

If a two percent increase in the price of bananas leads to a two percent decrease in the quantity of bananas demanded, then the demand for bananas is

A) elastic. B) inelastic. C) unit-elastic. D) perfectly inelastic.

Economics

The cross price elasticity of demand for a good x is the percentage change in the quantity demanded of good x in response to a given percentage change in

A) income. B) the price of good x. C) the price of good y. D) the quantity demanded of good y.

Economics

XYZ Computer Company has a monopoly on the sale of a specialized color printer. If it sells two of these printers its total revenue is $1,000, and if it sells three color printers its total revenue is $1,400. The marginal revenue of the third color printer sold is

A. $200. B. $300. C. $400. D. $1,300.

Economics