CS 13 Subject - economics 2. Using a payoff matrix to determine the equilibrium outcomeSuppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. The following payoff matrix shows the profit (inmillions of dollars) each company will earn, depending on whether it sets a high or low price for its players.Movietonia PricingVideotech PricingHighLow11, 112,158,8For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 millionand Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms.HighLow 15, 2If Movietonia prices high, Videotech will make more profit if it chooses amore profit if it chooses aprice.highIf Videotech prices high, Movietonia will make more profit if it chooses a lowmore profit if it chooses aprice.Considering all of the information given, pricing highIf the firms do not collude, what strategies will they end up choosing?TrueMovietonia 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 Videotech will choose a high price.1 Both Movietonia and Videotech will choose a low price.Falseprice, and if Movietonia prices low, Videotech will makea dominant strategy for both Movietonia and Videotech.price, and if Videotech prices low, Movietonia will makeTrue or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.

A multistage game steady state equilibrium known as the Nash equilibrium in economics and game…

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. High Movietonia Pricing Low Videotech Pricing High Low 11, 11 2,15 15, 2 8,8 For example, the lower-left cell shows that if 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. if Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high of Videotech prices high, Movietonia will make more profit if it chooses a low price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. 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 Videotech will choose a high price. Both Movietonia and Videotech will choose a low price. : True False True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA