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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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I don't understand how the pricing is laid out, high vs. low, or how do I compare what one company would make if it were to chose one over the other?

### 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.
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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