Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The foll gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers. Flashfry Pricing High Low 'Warmbreeze Pricing High Low 9,9 15, 2 2,15 8,8
Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The foll gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers. Flashfry Pricing High Low 'Warmbreeze Pricing High Low 9,9 15, 2 2,15 8,8
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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First 4 blanks: high/low
Last blank: is not/is

Transcribed Image Text:Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. 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 fryers.
Flashfry Pricing
If
chooses a
For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $15 million, and
Warmbreeze will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms.
High
Low
'Warmbreeze Pricing
High
Low
9,9
15, 2
2,15
8,8
prices high, Warmbreez will make more profit if it chooses a
price.
If Warmbreeze prices high, Flashfry will make more profit if it chooses a
chooses a
price.
Considering all of the information given, pricing low
True
If the firms do not collude, what strategies will they end up choosing?
O False
price, and if Flashfry prices low, Warmbreeze will make more profit if it
price, and if Warmbreeze prices low, Flashfry will make more profit if it
C
a dominant strategy for both Flashfry and Warmbreeze.
O Flashfry will choose a high price, and Warmbreeze will choose a low price.
Flashfry will choose a low price, and Warmbreeze will choose a high price.
Both Flashfry and Warmbreeze will choose a high price.
O Both Flashfry and Warmbreeze will choose a low price.
True or False: The game between Flashfry and Warmbreeze is not an example of the prisoners' dilemma.
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