Question

6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smartphones: Flashfone and Pictech. 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 phones. Pictech Pricing High Low Flashfone Pricing High Low 11, 113, 15 15,3 9,9 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $15 million, and Pictech will earn a profit of $3 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. price, and if Flashfone prices low, Pictech will make more profit if it If Flashfone prices high, Pictech will make more profit if it chooses a chooses a price. If Pictech prices high, Flashfone will make more profit if it chooses a price, and if Pictech prices low, Flashfone will make more profit if it chooses a price. Considering all of the information given, pricing high a dominant strategy for both Flashfone and Pictech. If the firms do not collude, what strategies will they end up choosing? Both Flashfone and Pictech will choose a low price. Flashfone will choose a low price, and Pictech will choose a high price. Both Flashfone and Pictech will choose a high price. Gachfone will choo biabric and Dietech will chooral Pico
BBlank answer choices:

1. (High, Low )

2. (High, Low)

3. (High, Low)

4. (High, Low)

5. (Is, Is not)

Answer 1

1 If Flashfore prices high, Pidech will make profit if it chooses a love price for 15711] If Flash frame prices low, pickech will choose love price [ay37 Considing all of the information given pare e If Piclech prices high flashfone call will choose love (as 15x11) and if Picheah prices low flashfone chooses love (1 973) So, considering all of the info. pricing high - is not a dominant s bakegy. If they do not collude, they cwill end up doo choosing - 1) bolh Plouhfent and Piclech will choose a - low price # The game between Flashfone and Píchech is not an example of prisoners' dêlemma, false