MGMT 298D-2 1.a) Nash equilibrai are at Oasis Oasia, and Brews Brews.

b)

Rollback equilibrium: If Oasis, go to Oasis, If Brews, go to Brews c)

2. ACC ACC (4000) UCC (5000) 4000 keep 10000 20000 20000 15000 UCC 5000 keep 7500 25000 15000 30000 4000 sell 10000 20000 16000 21000 5000 sell 7500 25000 15000 30000 If UCC keeps the plant, both ACC and UCC will drop their prices to $4,000 resulting in a profit of $10,000 for UCC. If UCC sells the plant, ACC will maintain a price of $5,000 while UCC will drop their price to $4,000 resulting in a profit of $16,000 for UCC. Based on these results it is in UCCs interest to take whatever they can get for the plant, and they would require $6,000 not to sell the plant. UCC #3 a) B2's Value B2's Bid $150 100-150 $200 151-200 If he bidded the actual value of the asset when valued at $200, unless B1 also values the asset at $200 (and not $150). nothing can be ruled out due to domination b) B1 should accept the offer for any bid up to his perceived value. c) B2's Value B2's Bid $150 149.99 $200 150.01 B2 will never win the bid of $150 because it is dominated by B1s strategy. He will only win the $200 valuation if B1 Values it lower. d) Likely Winner in game 1 TBD B2 B1 TBD Price (Range) in game 1 100-150 151-200 151-200 151-200 Likely winner in game 2 B1 B2 B1 B1

B1's B2's Value Value $150 150 $150 200 200 150 200 200

Price(range) in game 2 100-150 150.01 150 150.01-200