How does the use of credible threats or empty threats by firms affect outcomes and the Nash equilibrium in one-period games?
What will be an ideal response?
A credible threat is a statement of coercion that is believable by the other firm. An empty threat is a threat that is not believable by the threatened firm. If there is a credible threat in a single-period and simultaneous game, then it can cause the firms to abandon the Nash equilibrium to enjoy larger profits. It is, however, difficult to enforce such a threat and if it is not credible, it is an empty threat. Empty threats result in Nash equilibriums that do not change.
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Oligopoly is
A) always efficient. B) efficient only if the firms cooperate. C) efficient only if the firms play non-repeated games. D) generally not efficient. E) efficient only if the firms innovate.
Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit
Indicate whether the statement is true or false
Supply-side theory suggests that
A. increased labor productivity may not increase real output. B. increased government spending does not increase aggregate demand. C. higher tax rates may not increase overall tax revenues. D. aggregate supply does not depend on labor productivity.
The following table shows the price of a specific stereo receiver for a five-year period. Using year 3 as the base year, calculate the price index for each year
