For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms. If Movietonia prices high, Videotech will make more profit if it chooses a ▼ price, and if Movietonia prices low, Videotech will make more profit if it chooses a v price. If Videotech prices high, Movietonia will make more profit if it chooses a price, and if Videotech prices low, Movietonia will make more profit if it chooses a v price. Considering all of the information given, pricing high v a dominant strategy for both Movietonia and Videotech. If the firms do not collude, what strategies will they end up choosing? O Both Movietonia and Videotech will choose a high price. O Movietonia will choose a low price, and Videotech will choose a high price. O Movietonia will choose a high price, and Videotech will choose a low price. O Both Movietonia and Videotech will choose a low price. True or False: The game between Movietonia and Videotech is not an example of the prisoners' dilemma. O True O False
For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms. If Movietonia prices high, Videotech will make more profit if it chooses a ▼ price, and if Movietonia prices low, Videotech will make more profit if it chooses a v price. If Videotech prices high, Movietonia will make more profit if it chooses a price, and if Videotech prices low, Movietonia will make more profit if it chooses a v price. Considering all of the information given, pricing high v a dominant strategy for both Movietonia and Videotech. If the firms do not collude, what strategies will they end up choosing? O Both Movietonia and Videotech will choose a high price. O Movietonia will choose a low price, and Videotech will choose a high price. O Movietonia will choose a high price, and Videotech will choose a low price. O Both Movietonia and Videotech will choose a low price. True or False: The game between Movietonia and Videotech is not an example of the prisoners' dilemma. O True O False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![### Game Theory: Pricing Strategies of Movietonia and Videotech
Suppose there are only two firms that sell Blu-ray players: Movietonia and Videotech. 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 players.
#### Payoff Matrix:
![Payoff Matrix](matrix_image)
| | Videotech Pricing |
|---------------------|------------------------------|
| Movietonia Pricing | High | Low |
| High | 9, 9 | 2, 15 |
| Low | 15, 2 | 8, 8 |
For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms.
#### Analyzing the Payoff Matrix:
- **If Movietonia prices high, Videotech will make more profit if it chooses a ___ price, and if Movietonia prices low, Videotech will make more profit if it chooses a ___ price.**
- **If Videotech prices high, Movietonia will make more profit if it chooses a ___ price, and if Videotech prices low, Movietonia will make more profit if it chooses a ___ price.**
- Considering all of the information given, pricing high ___ a dominant strategy for both Movietonia and Videotech.
#### Strategy Selection Without Collusion:
If the firms do not collude, what strategies will they end up choosing?
- [ ] Both Movietonia and Videotech will choose a high price.
- [ ] Movietonia will choose a low price, and Videotech will choose a high price.
- [ ] Movietonia will choose a high price, and Videotech will choose a low price.
- [ ] Both Movietonia and Videotech will choose a low price.
#### True or False:
The game between Movietonia and Videotech is **not** an example of the prisoners' dilemma.
- [ ] True
- [ ] False
By understanding the payoff matrix and the resulting strategies, students can gain insight into the strategic decision-making process of firms in a competitive market.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3c66bc3d-1300-4141-a83b-0a5983915c45%2F2d9d8ea4-9409-444b-a51d-f91a9335a390%2Fo8vsift_processed.png&w=3840&q=75)
Transcribed Image Text:### Game Theory: Pricing Strategies of Movietonia and Videotech
Suppose there are only two firms that sell Blu-ray players: Movietonia and Videotech. 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 players.
#### Payoff Matrix:
![Payoff Matrix](matrix_image)
| | Videotech Pricing |
|---------------------|------------------------------|
| Movietonia Pricing | High | Low |
| High | 9, 9 | 2, 15 |
| Low | 15, 2 | 8, 8 |
For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms.
#### Analyzing the Payoff Matrix:
- **If Movietonia prices high, Videotech will make more profit if it chooses a ___ price, and if Movietonia prices low, Videotech will make more profit if it chooses a ___ price.**
- **If Videotech prices high, Movietonia will make more profit if it chooses a ___ price, and if Videotech prices low, Movietonia will make more profit if it chooses a ___ price.**
- Considering all of the information given, pricing high ___ a dominant strategy for both Movietonia and Videotech.
#### Strategy Selection Without Collusion:
If the firms do not collude, what strategies will they end up choosing?
- [ ] Both Movietonia and Videotech will choose a high price.
- [ ] Movietonia will choose a low price, and Videotech will choose a high price.
- [ ] Movietonia will choose a high price, and Videotech will choose a low price.
- [ ] Both Movietonia and Videotech will choose a low price.
#### True or False:
The game between Movietonia and Videotech is **not** an example of the prisoners' dilemma.
- [ ] True
- [ ] False
By understanding the payoff matrix and the resulting strategies, students can gain insight into the strategic decision-making process of firms in a competitive market.
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