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    Exam 0809

    Uploaded by

    Karen Yung
    This document provides instructions and questions for an industrial economics exam. It includes: - Three compulsory questions worth 60 marks total, involving game theory analysis of strategic interactions between breweries and coffee shop chains, as well as oligopoly market interactions between petrol stations. - Three optional 40-mark questions, involving topics like price-cost margins, Nash equilibrium in Hotelling models of spatial competition, and empirical studies linking industry structure to performance. - Instructions specify a two hour time limit and only basic calculators are permitted. Students must answer all compulsory questions and choose one optional question.

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    © All Rights Reserved
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    Exam 0809

    Uploaded by

    Karen Yung
    121 views2 pages
    This document provides instructions and questions for an industrial economics exam. It includes: - Three compulsory questions worth 60 marks total, involving game theory analysis of strategic interactions between breweries and coffee shop chains, as well as oligopoly market interactions between petrol stations. - Three optional 40-mark questions, involving topics like price-cost margins, Nash equilibrium in Hotelling models of spatial competition, and empirical studies linking industry structure to performance. - Instructions specify a two hour time limit and only basic calculators are permitted. Students must answer all compulsory questions and choose one optional question.

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    This document provides instructions and questions for an industrial economics exam. It includes: - Three compulsory questions worth 60 marks total, involving game theory analysis of strategic interactions between breweries and coffee shop chains, as well as oligopoly market interactions between petrol stations. - Three optional 40-mark questions, involving topics like price-cost margins, Nash equilibrium in Hotelling models of spatial competition, and empirical studies linking industry structure to performance. - Instructions specify a two hour time limit and only basic calculators are permitted. Students must answer all compulsory questions and choose one optional question.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    121 views2 pages

    Exam 0809

    Uploaded by

    Karen Yung
    This document provides instructions and questions for an industrial economics exam. It includes: - Three compulsory questions worth 60 marks total, involving game theory analysis of strategic interactions between breweries and coffee shop chains, as well as oligopoly market interactions between petrol stations. - Three optional 40-mark questions, involving topics like price-cost margins, Nash equilibrium in Hotelling models of spatial competition, and empirical studies linking industry structure to performance. - Instructions specify a two hour time limit and only basic calculators are permitted. Students must answer all compulsory questions and choose one optional question.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    INDUSTRIAL ECONOMICS

    A LEVEL D MODULE, SPRING SEMESTER 2008-2009


    Time allowed TWO Hours
    Only silent, self-contained calculators with a Single-line or Dual-line Display are permitted
    in this examination.
    Answer ALL of Question ONE and any ONE other question

    1. (This question is worth 60 marks and is compulsory).

    (a) Consider the following static game in which two breweries, Flintoff and
    Pietersen, choose to compete either through advertising (A), research and
    development (R&D) or exports (E). The game is played once only and the
    possible payoffs are shown in the following table, with the payoff for Flintoff
    being given first.

    Pietersen
    A R&D E
    A 0, 1 9, 0 4, 3
    Flintoff R&D 5, 9 7, 3 1, 7
    E 7, 5 9, 9 3, 5

    (i) Identify any pure strategy Nash Equilibria. (5 marks)


    (ii) Briefly explain the likely solution to this game. (5 marks)

    (b) Consider the following dynamic game played between three coffee shop
    chains, A, B and C.

    NP
    B (1,1,1)

    P NP (2,3,2)
    N A
    P (0,0,2)
    A
    D NP
    C (3,3,3)

    P NP (1,2,4)
    A
    P (0,4,0)

    The numbers in brackets indicate the final payoffs in the order (A,B,C). N,
    D, P and NP indicate the following actions:

    N = open a coffee shop in Nottingham


    D = open a coffee shop in Derby
    P = price cuts
    NP = no price cuts.

    (i) Write down the pure strategies available to each player. (5 marks)
    (ii) Identify all the sub-games. (5 marks)
    (iii) Find any sub-game perfect Nash Equilibria in this game. (5 marks)
    (c) A town has two garages, A and B, selling identical petrol. The inverse
    demand function for petrol in the town is given by

    1
    P = 30 3Q
    where P is the market price and Q = QA + QB where QA and QB are the
    quantities sold by A and B respectively. Unit costs are 9 per gallon for
    Garage A and 6 per gallon for Garage B.

    (i) If the two garages compete on quantity in a one shot static game, find
    the Nash Equilibrium quantities, price and profits.
    (17 marks)

    (ii) What is the value of the Herfindahl index of concentration at the


    equilibrium outputs?
    (5 marks)

    (iii) How would your answers in (i) change if the garages compete on
    price?
    (8 marks)

    (iv) Briefly discuss whether the garages would be more likely to compete
    on price or on quantity.
    (5 marks)

    (The following questions are worth 40 marks each answer ONE only)

    2. (a) Explain how accounting data might be used to measure the price cost
    margin at (i) the firm level and (ii) the industry level. (10 marks)

    (b) Explain the difference between the Nash Equilibrium number of firms and the
    socially optimal level of firms in the Hotelling address model with entry.
    (30 marks)

    3. (a) The decrease in importance of empirical studies linking industrial structure


    with performance can be explained largely by the difficulty of distinguishing
    causation from correlation.
    Explain and discuss this statement. (30 marks)

    (b) Explain the conditions necessary for a Nash Equilibrium in the Hotelling
    address model without entry. (10 marks)

    4. (a) Explain any four of the following concepts in the context of industrial
    economics.
    (i) Conjectural variations.
    (ii) Mixed strategy equilibrium.
    (iii) Nash Equilibrium in the Hotelling address model without entry.
    (iv) Nash Equilibrium in the Hotelling address model with entry.
    (v) New Empirical Industrial Organisation.
    (vi) The identification problem.
    (10 marks each)

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