If Snapface prices high, Instashot will make more profit if it chooses a price. chooses a If Instashot prices high, Snapface will make more profit if it chooses a chooses a price. price, and if Snapface prices low, Instashot will make more profit if it price, and if Instashot prices low, Snapface will make more profit if it

If Snapface prices high, Instashot will make more profit if it chooses a price. chooses a If Instashot prices high, Snapface will make more profit if it chooses a chooses a price. price, and if Snapface prices low, Instashot will make more profit if it price, and if Instashot prices low, Snapface will make more profit if it

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The first 4 drop down options are "High" or "low." The last fill-in-the-blank options are "Is" or "Is not." Thank you!

6. Using a payoff matrix to determine the equilibrium outcome
Suppose that Snapface and Instashot are the only two firms in a hypothetical market that produce and sell polaroid cameras. The following payoff
matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for cameras.
Snapface Pricing
High
Low
Instashot Pricing
High
Low
11, 11
15, 3
For example, the lower-left cell shows that if Snapface prices low and Instashot prices high, Snapface will earn a profit of $15 million, and Instashot
will earn a profit of $3 million. Assume this is a simultaneous game and that Snapface and Instashot are both profit-maximizing firms.
3, 15
9,9
If Snapface prices high, Instashot will make more profit if it chooses a
chooses a price.
If Instashot prices high, Snapface will make more profit if it chooses a
chooses a price.
Considering all of the information given, pricing high
True
If the firms do not collude, what strategies will they end up choosing?
False
price, and if Snapface prices low, Instashot will make more profit if it
price, and if Instashot prices low, Snapface will make more profit if it
a dominant strategy for both Snapface and Instashot.
Both Snapface and Instashot will choose a high price.
Snapface will choose a low price, and Instashot will choose a high price.
Both Snapface and Instashot will choose a low price.
Snapface will choose a high price, and Instashot will choose a low price.
True or False: The game between Snapface and Instashot is not an example of the prisoners' dilemma.

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