high low high 11, 11 2,18 low 18, 2 10,10 Suppose 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. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing firms. If the firms do not collude, what strategies will they end up choosing? 1. Padmania will choose a low price, and Capturesque will choose a high price. 2. Both Padmania and Capturesque will choose a high price. 3. Padmania will choose a high price, and Capturesque will choose a low price. 4. Both Padmania and Capturesque will choose a low price. True or False: The game between Padmania and Capturesque is an example of the prisoners’ dilemma. 1. True 2. False
high low high 11, 11 2,18 low 18, 2 10,10 Suppose 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. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing firms. If the firms do not collude, what strategies will they end up choosing? 1. Padmania will choose a low price, and Capturesque will choose a high price. 2. Both Padmania and Capturesque will choose a high price. 3. Padmania will choose a high price, and Capturesque will choose a low price. 4. Both Padmania and Capturesque will choose a low price. True or False: The game between Padmania and Capturesque is an example of the prisoners’ dilemma. 1. True 2. False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
| high | low | ||
| high | 11, 11 |
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| low | 18, 2 | 10,10 |
Suppose 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
For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $18 million, and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing firms.
If the firms do not collude, what strategies will they end up choosing?
1. Padmania will choose a low price, and Capturesque will choose a high price.
2. Both Padmania and Capturesque will choose a high price.
3. Padmania will choose a high price, and Capturesque will choose a low price.
4. Both Padmania and Capturesque will choose a low price.
True or False: The game between Padmania and Capturesque is an example of the prisoners’ dilemma.
1. True
2. False
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