6)Game Theory: The Prisoners’ Dilemma: Assume that the Wilson and Spalding athletic equipment companies are in a one-shot game for market share and profits, but that they have the option of choosing only one of two possible price strategies for basketballs: $20 or $80. Obviously if they choose different strategies, the firm with the lower price will win the entire market. The firms face the following payoff matrix (See Chap. 10). Wilson\ \Spalding Wilson $ 20 Price Wilson $ 80 Price Spalding $ 20 Price $ 400, $ 400 $ 1500, $ 0 Spalding $ 80 Price $ 0, $ 1500 $ 1000, $ 1000 What strategy will each firm choose? Why? Which strategy is dominant? Which strategy is preferred by each firm? What will be the outcome of the one-shot game? Where is the Nash equilibrium? Which outcome would be best for the two firms? What will happen if the game is repeated an infinite number of times?
6)
|
Wilson\ \Spalding |
Wilson $ 20 Price |
Wilson $ 80 Price |
|
Spalding $ 20 Price |
$ 400, $ 400
|
$ 1500, $ 0
|
|
Spalding $ 80 Price |
$ 0, $ 1500
|
$ 1000, $ 1000 |
What strategy will each firm choose? Why? Which strategy is dominant? Which strategy is preferred by each firm? What will be the outcome of the one-shot game? Where is the Nash equilibrium? Which outcome would be best for the two firms? What will happen if the game is repeated an infinite number of times?
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
