6 Using A Payoff Matrix To Determine The Equilibrium Outcome Suppose There Are Only Two Firms That Sell Smartphones Fl 1 (26.88 KiB) Viewed 117 times
6 Using A Payoff Matrix To Determine The Equilibrium Outcome Suppose There Are Only Two Firms That Sell Smartphones Fl 2 (13.31 KiB) Viewed 117 times
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 2.15 11.11 Flashfone Pricing High Low 15,2 For example, the lower-left cell shows that if Flashtone prices low and Pictech prices high, Flashtone will earn a profit of $15 millon, cha 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, Pietech will make more profit if it chooses a price price, and if Flashfone prices low, Pictech will make more profit if it chooses If Pictech prices high, Flashfone will make more profit if it chooses a price price, and if Pictech prices low, Flashrone will make more profit if it chooses Considering all of the information given, pricing low a dominant strategy for both Flashfone and Pictech
If the firms do not collude, what strategles will they end up choosing? Flashfone will choose a low price, and Pictech will choose a high price. Both Flashfone and Pictech will choose a low price. Flashfone will choose a high price, and Pictech will choose a low price. Both Flashfone and Pictech will choose a high price. True or False: The game between Flashfone and Pictech is not an example of the prisoners' dilemma. True False
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