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.Capturesque PricingHighLowHigh11, 112, 18Padmania PricingLow18, 210, 10For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, andCapturesque will earn a profit of $2 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 a▼ price, and if Padmania prices low, Capturesque will make more profit ifit chooses aprice.If Capturesque prices high, Padmania will make more profit if it chooses aprice, and if Capturesque prices low, Padmania will make more profit ifit chooses aprice.Considering all of the information given, pricing higha dominant strategy for both Padmania and Capturesque.If the firms do not collude, what strategies will they end up choosing?O Padmania will choose a low price, and Capturesque will choose a high price.O Both Padmania and Capturesque will choose a high price.O Padmania will choose a high price, and Capturesque will choose a low price. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, andCapturesque will earn a profit of $2 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 aprice, and if Padmania prices low, Capturesque will make more profit ifit chooses a ▼ price.If Capturesque prices high, Padmania will make more profit if it chooses aprice, and if Capturesque prices low, Padmania will make more profit ifit chooses av price.Considering all of the information given, pricing highv a dominant strategy for both Padmania and Capturesque.If the firms do not collude, what strategies will they end up choosing?O Padmania will choose a low price, and Capturesque will choose a high price.O Both Padmania and Capturesque will choose a high price.O Padmania will choose a high price, and Capturesque will choose a low price.Both Padmania and Capturesque will choose a low price.True or False: The game between Padmania and Capturesque is not an example of the prisoners' dilemma.TrueO False

The supply function shows arranged reactions to contrasting level of cost. Assuming either the…

Capturesque Pricing High Low High 11, 11 2, 18 eing Low 18, 2 10, 10 ower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing s high, Capturesque will make more profit if it chooses a price, and if Padmania prices low, Capturesque will make more profit if price. ces high, Padmania will make more profit if it chooses a price, and if Capturesque prices low, Padmania will make more profit if price. the information given, pricing high a dominant strategy for both Padmania and Capturesque. : collude, what strategies will they end up choosing?

Capturesque Pricing High Low High 11, 11 2, 18 eing Low 18, 2 10, 10 ower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing s high, Capturesque will make more profit if it chooses a price, and if Padmania prices low, Capturesque will make more profit if price. ces high, Padmania will make more profit if it chooses a price, and if Capturesque prices low, Padmania will make more profit if price. the information given, pricing high a dominant strategy for both Padmania and Capturesque. : collude, what strategies will they end up choosing?

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

See similar textbooks

Similar questions

What is predatory pricing?
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Aside from advertising, how can monopolistically competitive films increase demand for their products?
Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
What is predatory pricing? How might it reduce competition, and why might it be difficult to tell when it should be illegal?
What is the relationship between product differentiation and monopolistic competition?
Suppose that, due to a successful advertising campaign, a monopolistic competitor experiences an increase in demand for its product. How will that affect the price it charges and the quantity it supplies?
When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.
Suppose the market for Hula Hoops is monopolized by a single firm. a. Draw the initial equilibrium for such a market. b. Now suppose the demand for Hula Hoops shifts outward slightly. Show that, in general (contrary to the competitive case), it will not be possible to predict the effect of this shift in demand on the market price of Hula Hoops. c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.
If you were developing a product (like a web browser) for a market with significant barriers to entry, how would you try to get your product into the market successfully?
For many years, the Justice Department has tried to break up large firms like IBM, Microsoft, and most recently Google, on the grounds that their large market share made them essentially monopolies. In a global market, where U.S. films compete with firms from other countries, would this policy make the same sense as it might in a purely domestic context?