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: If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million. If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million. If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? Dell? If so, which one? If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
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: If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million. If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million. If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million. If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? Dell? If so, which one? If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Chapter9: Monopolistic Competition And Oligoply
Section: Chapter Questions
Problem 18SQ
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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:
- If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million.
- If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million.
- If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million.
- If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.
Please answer the follow questions:
- Does Sony have a dominant strategy? Dell? If so, which one?
- If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix?
- Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
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