high low high 11, 11 2,18 low 18, 2 10,10 Suppose there are only two firms that sell tablets: Padmania and Capturesque. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its tablets. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing firms.   If the firms do not collude, what strategies will they end up choosing?   1. Padmania will choose a low price, and Capturesque will choose a high price.   2. Both Padmania and Capturesque will choose a high price.   3. Padmania will choose a high price, and Capturesque will choose a low price.   4. Both Padmania and Capturesque will choose a low price.     True or False: The game between Padmania and Capturesque is an example of the prisoners’ dilemma. 1. True   2. False

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