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suppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. 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 players. High Movietonia Pricing Low Videotech Pricing High Low 11, 11 2,15 15, 2 8,8 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit- maximizing firms. if Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high of Videotech prices high, Movietonia will make more profit if it chooses a low price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. Both Movietonia and Videotech will choose a low price. : True False True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.

suppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. 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 players. High Movietonia Pricing Low Videotech Pricing High Low 11, 11 2,15 15, 2 8,8 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit- maximizing firms. if Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high of Videotech prices high, Movietonia will make more profit if it chooses a low price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. Both Movietonia and Videotech will choose a low price. : True False True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.

Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
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CS 13 

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2. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. 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 players. Movietonia Pricing Videotech Pricing High Low 11, 11 2,15 8,8 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit- maximizing firms. High Low 15, 2 If Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high If Videotech prices high, Movietonia will make more profit if it chooses a low more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? True Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. 1 Both Movietonia and Videotech will choose a low price. False price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. price, and if Videotech prices low, Movietonia will make True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.
Transcribed Image Text:2. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. 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 players. Movietonia Pricing Videotech Pricing High Low 11, 11 2,15 8,8 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit- maximizing firms. High Low 15, 2 If Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high If Videotech prices high, Movietonia will make more profit if it chooses a low more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? True Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. 1 Both Movietonia and Videotech will choose a low price. False price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. price, and if Videotech prices low, Movietonia will make True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.
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