6. Using a payoff matrix to determine the equilibrium outcomeSuppose there are only two firms that sell tablets: Padmania and Capturesque. 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 tablets.Padmania Pricingfirms.HighLowCapturesque PricingLow4, 137,7For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $13 million, andCapturesque will earn profit of $4 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizingHigh8,813,4If Padmania prices high, Capturesque will make more profit if it chooses aprofit if it chooses aprice.If Capturesque prices high, Padmania will make more profit if it chooses aprofit if it chooses aprice.Considering all of the information given, pricing lowIf the firms do not collude, what strategies will they end up choosing?TruehighBoth Padmania and Capturesque will choose a low price.lowprice, and if Padmania prices low, Capturesque will make morea dominant strategy for both Padmania and Capturesque.price, and if Capturesque prices low, Padmania will make more.O Padmania will choose a high price, and Capturesque will choose a low price.OBoth Padmania and Capturesque will choose a high price.O Padmania will choose a low price, and Capturesque will choose a high price.True or False: The game between Padmania and Capturesque is not an example of the prisoners' dilemma. 6. Using a payoff matrix to determine the equilibrium outcomeSuppose there are only two firms that sell tablets: Padmania and Capturesque. 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 tablets.Padmania PricingHighLowCapturesque PricingHighLOW8,813,44, 137,7For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $13 million, andCapturesque will earn a profit of $4 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizingfirms.If Padmania prices high, Capturesque will make more profit if it chooses aprofit if it chooses aprice.If Capturesque prices high, Padmania will make more profit if it chooses aprofit if it chooses a▼price.Considering all of the information given, pricing lowIf the firms do not collude, what strategies will they end up choosing?a dominant strategy for both Padmania and Capturesque.Both Padmania and Capturesque will choose a low price.Trueprice, and if Padmania prices low, Capturesque will make moreO Padmania will choose a high price, and Capturesque will choose a low price.OBoth Padmania and Capturesque will choose a high price.price, and if Capturesque prices low, Padmania will make morePadmania will choose a low price, and Capturesque will choose a high price.True or False: The game between Padmania and Capturesque is not an example of the prisoners' dilemma.

Prisoner's Dilemma: Prisoner's Dilemma is an instance in game theory where 2 arobbers, questioned on…

dmania Pricing High Low Capturesque Pricing High Low 8,8 13,4 4, 13 7,7 mple, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $13 million, and esque will earn a profit of $4 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing hania prices high, Capturesque will make more profit if it chooses a it chooses a price. high uresque prices high, Padmania will make more profit if it chooses a it chooses a price. ering all of the information given, pricing low rms do not collude, what strategies will they end up choosing? low price, and if Padmania prices low, Capturesque will make more a dominant strategy for both Padmania and Capturesque. Both Padmania and Capturesque will choose a high price. price, and if Capturesque prices low, Padmania will make more OPadmania will choose a high price, and Capturesque will choose a low price. OBoth Padmania and Capturesque will choose a low price. O Padmania will choose a low price, and Capturesque will choose a high price. False: The game between Padmania and Capturesque is not an example of the prisoners' dilemma.

dmania Pricing High Low Capturesque Pricing High Low 8,8 13,4 4, 13 7,7 mple, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $13 million, and esque will earn a profit of $4 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing hania prices high, Capturesque will make more profit if it chooses a it chooses a price. high uresque prices high, Padmania will make more profit if it chooses a it chooses a price. ering all of the information given, pricing low rms do not collude, what strategies will they end up choosing? low price, and if Padmania prices low, Capturesque will make more a dominant strategy for both Padmania and Capturesque. Both Padmania and Capturesque will choose a high price. price, and if Capturesque prices low, Padmania will make more OPadmania will choose a high price, and Capturesque will choose a low price. OBoth Padmania and Capturesque will choose a low price. O Padmania will choose a low price, and Capturesque will choose a high price. False: The game between Padmania and Capturesque is not an example of the prisoners' dilemma.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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