Dell and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix: If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million. If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million. If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? Dell? If so, which one? If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Dell and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix: If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million. If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million. If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? Dell? If so, which one? If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 1E
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Dell and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix:
- If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million.
- If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million.
- If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million.
- If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.
Please answer the follow questions:
- Does Sony have a dominant strategy? Dell? If so, which one?
- If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix?
- Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
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