Question

6. 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. Videotech Pricing High Low High 9,9 2, 15 Movietonia Pricing Low 15, 2 8,8 For example, the lower-left cell shows that 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. price, and if Movietonia prices low, Videotech will make more If Movietonia prices high, Videotech will make more profit if it chooses a profit if it chooses a price price, and if Videotech prices low, Movietonia will make more If Videotech prices high, Movietonia will make more profit if it chooses a profit if it chooses a price. Considering all of the information given, pricing high a dominant strategy for both Movietonia and Videotech.

Answer 1

6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray prayers: Movietoria and Videotech. The following payoff matrix shows the profit (in millions of dolars) each company will earn, depending on whether t sets tigh or low price for its players. Videotech Pricing LOW High 29 Moviston Pricing LON 152 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonis wil carn a profit of $15 million, and Videotech wilcar a profit of $2 milion. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms. Low price, and I Movietonia prices low, Videctech will make more Ir Movietonia prices high, Videotech will make more profit if it chooses a profit rit chooses a Low price. Videotech prices high, Movietonia will make more profit if chooses a Low price, and if Videotech prices low, Movietonis will make more profit if it chooses a Low price Considering all of the information gwen, pricing high is not a dominant strategy for both Movietonis and Videotech. Ir Movietonia prices high, Videotech will make more profit if it chooses a Low price, and ir Movietonia prices low, Videotech will make more profit if it chooses a Low price. If Videotech prices high, Movietonia will meke more profit if it chooses a Low price, and if Videotech prices low, Movietonia will make more profit if it chooses a Low price. Considering all of the information given, pricing high is not a dominant strategy for both Movietonia and Videotech. If the firms do not collude, what strategies will they end up choosing? 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 Videotoch will choose a high price. Both Movietonia and Videotech will choose a low price. True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma. False The → Because both flayers choose that strategy that constitute a nash forofits. This is a basic charáčitesstic equilibrium but that strategy doeln't maximise theis Prisoners' Dilemma games

Answer 2

Its false at the end not true