Question

D. Ve Someo It саl асtiосоо с ольору) C. Assuming that there are only 2 cell phone companies in the world, iPhone and Samsung, what is the ((Nash) Equilibrium) or price that each company in the following matrix will charge? At that price, what profits do each company get? Note that the first number listed in bold is the profit for iPhone and the second number listed that is italicized is the profit for Samsung. (10) D. Is there a way that iPhone and Samsung could collude to increase profits? What might prohibit this collusion? (5) $500 $17000 $350 $10000 $500 $23000 $17000 Samsung $400 $14000 $20000 $16000 $16000 $17000 $13000 $13000 iPhone $400 $19000 $19000 $14000 $14000 $350 $21,000 $15000 $11000

Answer 1

Normal form game

iPhone/ samsung	$500	$400	$350
$500	(17000,17000)	(14000,20000)	(10000,23000•)
$400	(19000,14000)	(16000, 16000)	(13000,19000•)
$350	(21000*,11000)	(17000*,13000)	(14000*,15000•)

NE: ($350, $350)

both iphone & samsung charge P = $350

iphone receive π = 14,000

& Samsung receive = 15,000

.

b) if both could Collude, each can earn higher Payoff as compared to NE

So if both could charge P= 500, each gets = 17000

Each charge P = 400, then each firm payoff = 16000

but each firm will have incentive to deviate, as both have their dominant strategy of charging 350 , so they will deviate & collusion will be unstable

.