PArt C D E last parts Question #6: Dell and Sony compete primarily by price. Each firm must choose either a highprice or a low price simultaneously. Use the following information to create the profit matrix:1. If Sony and Dell both set high prices, Dell's profit is $40 million and Sony's profit is $35million.2. If Dell sets high price and Sony sets low price, Dell's profit is $25 million and Sony's profit is$40 million.3. If Dell sets low price and Sony sets high price, Dell's profit is $50 million and Sony's profit is$10 million.4. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.Please answer the follow questions:a. Does Sony have a dominant strategy? Dell? If so, which one?b. If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for thisgame?c. Instead, if Dell and Sony maximize their joint profits cooperatively for one year, what is the|equilibrium?d. Would your answer in part c above be different if Dell and Sony jointly maximize their profitsfor ten years, or indefinitely?e. From the policy maker standpoint who wants to maximize national welfare (ie consumersurplus and producer surplus), would you prefer Sony and Dell to cooperate or not to cooperateto set prices? Please explain why.

Introduction Dell and Sony compete primarily by price. Both company will get more profit when they…

c. Instead, if Dell and Sony maximize their joint profits cooperatively for one year, what is the| equilibrium? d. Would your answer in part c above be different if Dell and Sony jointly maximize their profits for ten years, or indefinitely? e. From the policy maker standpoint who wants to maximize national welfare (ie consumer surplus and producer surplus), would you prefer Sony and Dell to cooperate or not to cooperate to set prices? Please explain why.

c. Instead, if Dell and Sony maximize their joint profits cooperatively for one year, what is the| equilibrium? d. Would your answer in part c above be different if Dell and Sony jointly maximize their profits for ten years, or indefinitely? e. From the policy maker standpoint who wants to maximize national welfare (ie consumer surplus and producer surplus), would you prefer Sony and Dell to cooperate or not to cooperate to set prices? Please explain why.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

PArt C D E

last parts

Question #6: Dell and Sony compete primarily by price. Each firm must choose either a high
price or a low price simultaneously. Use the following information to create the profit matrix:
1. If Sony and Dell both set high prices, Dell's profit is $40 million and Sony's profit is $35
million.
2. If Dell sets high price and Sony sets low price, Dell's profit is $25 million and Sony's profit is
$40 million.
3. If Dell sets low price and Sony sets high price, Dell's profit is $50 million and Sony's profit is
$10 million.
4. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.
Please answer the follow questions:
a. Does Sony have a dominant strategy? Dell? If so, which one?
b. If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this
game?
c. Instead, if Dell and Sony maximize their joint profits cooperatively for one year, what is the|
equilibrium?
d. Would your answer in part c above be different if Dell and Sony jointly maximize their profits
for ten years, or indefinitely?
e. From the policy maker standpoint who wants to maximize national welfare (ie consumer
surplus and producer surplus), would you prefer Sony and Dell to cooperate or not to cooperate
to set prices? Please explain why.

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