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 High 11, 11 3, 15 Flashfone Pricing Low 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. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it

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 High 11, 11 3, 15 Flashfone Pricing Low 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. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 5MC

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Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smart phones, 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 11, 11 2, 18 Low 18, 2 10, 10 For example, the lower, left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a ______ price, and if Flashfone prices low, Pictech will make more profit if it 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…
There are two competing firms, Jack and Jill represents a normal form of a game of two firms that produce a widget that is identical in quality. The rows in the table below correspond to the two different strategies available to firm Jack: price High or Low. The columns correspond to the same strategies for Jill: price High or price Low. The numbers in the tables show the profits. The number on the left (first number) is Jack firm profit, and the numbers on the right (second number) is Jill’s firm profit in millions of dollars. For example, If both price High (the upper left cell), then they each get 10 million in profits. If a firm prices high, the other firm prices low, consumers will have a choice to go to the low firm and the firm that prices high will get zero while the firm that prices low will get all market share. The game is played simultaneously, meaning same time and neither will know what the decision is.…
The New York Times reports that Wal-Mart has decided to challenge Netflix and enter the online DVD-by-mail market. Because of economies of scale, Wal-Mart has a slight cost advantage relative to Netflix. Wal-Mart is considering the use of a limit pricing strategy. It can enter the market by matching Netflix on price. If it does, and Netflix maintains its price, then both firms would earn $5 million. But if Netflix drops its price in response, Wal-Mart would have to follow and would earn $2 million; Netflix would earn $3 million. Or Wal-Mart could enter the market with a price that is below Netflix's current price but above its marginal cost. If it does, Netflix would make one of two moves. It could reduce its price to below that of Wal-Mart. If it does, Wal-Mart will earn a profit of $0, and Netflix will earn a profit of $2 mil- lion. Or Netflix could keep its present price. If Netflix keeps its present price, Wal-Mart can keep its present price and earn $6 million (while Netflix earns…
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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 11, 11 3, 15 Low 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. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it 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…
The following table depicts two firms in a single-stage duopoly game. Each firm makes its decision without knowledge of the other firm's decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. If X is greater than $3,500, then there is/are Tasha's Flower ShopP Produce 300 flowers Produce 200 flowers $2,500 $3,500 Produce 200 $2,500 flowers $1,000 Joshua's Flower Shop $1,000 Produce 300 $3,500 flowers only one Nash equilibrium, and this game would be considered a prisoner's dilemma. b. two Nash equilibriums, and this game would be considered a prisoner's dilemma. three Nash equilibriums, and this game would be considered a prisoner's dilemma. d. only one Nash equilibrium, and this game would not be considered a prisoner's dilemma. two Nash equilibriums, and this game would not be considered a prisoner's dilemma. а. c. е.
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 11, 11 2, 18 Low 18, 2 10, 10 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million, and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a (HIGH OR LOW) price, and if Flashfone prices low, Pictech will make more profit if it chooses a (HIGH OR LOW) price. If Pictech prices high, Flashfone will make more profit if it chooses a (HIGH OR LOW) price, and if Pictech prices low, Flashfone will make more profit if it chooses a (HIGH OR LOW)…
Using a payoff matrix/table to determine the equilibrium outcome Suppose there are only two firms that sell smartphones, Flashfone and Pictech. The following payoff matrix/table 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 10, 10 4, 12 Low 12, 4 9, 9 For example, the lower left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $12 million and Pictech will earn a profit of $4 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it 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…
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aepioymentld=598281800483229979995799&elSBN=9780357133606&id%3D1061548135&snapshotld%32200166& 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 High 11, 11 2, 15 Flashfone Pricing Low 15, 2 8, 8 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 $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses ▼ price. a If Pictech prices high, Flashfone will make more profit if it chooses a price, and…