Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($400) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the bavoli matris to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? Assuming HP and Dell can coordinate to maximize profits, HP's profit will change by $ and Dell's profit will change by. (Enter either positive or negative numeric responses using integers.) GLED Price $400 Dell Price $350 HP Price $400 Price $350 $80 $90 $80 $20 $20 $50 $90 $50 DU

Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($400) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the bavoli matris to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? Assuming HP and Dell can coordinate to maximize profits, HP's profit will change by $ and Dell's profit will change by. (Enter either positive or negative numeric responses using integers.) GLED Price $400 Dell Price $350 HP Price $400 Price $350 $80 $90 $80 $20 $20 $50 $90 $50 DU

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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