Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($450) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350 then Dell will match that price and also charge $350 What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? HP's profit will change by $(blank) and Dell's profit will change by (blank) (Enter either positive or negative numeric responses using integers.) HP $80/$8 $90/$5 Dell $5/$90 $45/$45
Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($450) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350 then Dell will match that price and also charge $350 What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? HP's profit will change by $(blank) and Dell's profit will change by (blank) (Enter either positive or negative numeric responses using integers.) HP $80/$8 $90/$5 Dell $5/$90 $45/$45
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
Section: Chapter Questions
Problem 9MC
Question
Do not use Ai
![Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both
companies must choose whether to charge a high price ($450) or a low price ($350) for their
printers.
These price strategies with corresponding profits are depicted in the payoff matrix to the right.
HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash
equilibrium.
Then, HP and Dell advertise that they will match any lower price of their competitors. For
example, if HP charges $350 then Dell will match that price and also charge $350
What effect will matching prices have on profits (relative to the Nash equilibrium without price
matching)?
HP's profit will change by $(blank) and Dell's profit will change by (blank)
(Enter either positive or negative numeric responses using integers.)
HP
$80/$8
$90/$5
Dell
$5/$90
$45/$45](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F11a7a53f-af58-4841-9a49-c44ba883ee44%2F7eeaa3a4-8840-4864-a310-de3179695cab%2F4bqc5c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both
companies must choose whether to charge a high price ($450) or a low price ($350) for their
printers.
These price strategies with corresponding profits are depicted in the payoff matrix to the right.
HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash
equilibrium.
Then, HP and Dell advertise that they will match any lower price of their competitors. For
example, if HP charges $350 then Dell will match that price and also charge $350
What effect will matching prices have on profits (relative to the Nash equilibrium without price
matching)?
HP's profit will change by $(blank) and Dell's profit will change by (blank)
(Enter either positive or negative numeric responses using integers.)
HP
$80/$8
$90/$5
Dell
$5/$90
$45/$45
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