Introductory Microeconomics: Problem Set Week 6

1. Consider two social network/media platforms which are each considering adopting a controversial policy such as banning (posts by) an influential public figure or implementing a rigorous programme to identify and delete content considered harmful for minors (or something else that you think is interesting). Set up a game (which should involve a payoff matrix) that describes their interaction and allows you to identify any equilibria.


2. Last week, in Question 5, you found a Nash equilibrium in a duopoly where the firms engaged in Cournot competition, choosing quantities. In Bertrand competition, firms compete on prices.
   
   
   1. Suppose the firms proposed to charge the monopoly price and split the quantity demanded between them. Would respecting the collusive agreement be a Nash equilibrium?
   2. Now imagine that the 'one-shot' game just described is repeated two times. Firms' strategies can now specify responses to actions in previous rounds. Can collusion be sustained as Nash equilibrium now? How does 'backwards unravelling' affect your answer?


3. CORE Exercise 4.3
4. CORE Exercise 4.11
5. CORE Exercise 4.12
6. CORE Exercise 4.14


7. Questions 5 and 6 from this pdf.