Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. 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 scooters. Zipride Pricing High Low Citron Pricing High 10, 10 16,5 For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $16 million, and Citron will earn a profit of $5 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms. Low 5, 16 7,7 If Zipride prices high, Citron will make more profit if it chooses a price. If Citron prices high, Zipride will make more profit if it chooses a price. True False price, and if Zipride prices low, Citron will make more profit if it chooses a Considering all of the information given, pricing high a dominant strategy for both Zipride and Citron. If the firms do not collude, what strategies will they end up choosing? Zipride will choose a low price, and Citron will choose a high price. Both Zipride and Citron will choose a low price. Zipride will choose a high price, and Citron will choose a low price. Both Zipride and Citron will choose a high price. price, and if Citron prices low, Zipride will make more profit if it chooses a True or False: The game between Zipride and Citron is not an example of the prisoners' dilemma.
Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. 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 scooters. Zipride Pricing High Low Citron Pricing High 10, 10 16,5 For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $16 million, and Citron will earn a profit of $5 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms. Low 5, 16 7,7 If Zipride prices high, Citron will make more profit if it chooses a price. If Citron prices high, Zipride will make more profit if it chooses a price. True False price, and if Zipride prices low, Citron will make more profit if it chooses a Considering all of the information given, pricing high a dominant strategy for both Zipride and Citron. If the firms do not collude, what strategies will they end up choosing? Zipride will choose a low price, and Citron will choose a high price. Both Zipride and Citron will choose a low price. Zipride will choose a high price, and Citron will choose a low price. Both Zipride and Citron will choose a high price. price, and if Citron prices low, Zipride will make more profit if it chooses a True or False: The game between Zipride and Citron is not an example of the prisoners' dilemma.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:2. Using a payoff matrix to determine the equilibrium outcome
Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. 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 scooters.
Zipride Pricing
High
Low
Citron Pricing
High
Low
10, 10
5, 16
16,5
For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $16 million, and Citron will earn a
profit of $5 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms.
7,7
If Zipride prices high, Citron will make more profit if it chooses a
price.
If Citron prices high, Zipride will make more profit if it 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?
O False
price, and if Zipride prices low, Citron will make more profit if it chooses a
price, and if Citron prices low, Zipride will make more profit if it chooses a
a dominant strategy for both Zipride and Citron.
Zipride will choose a low price, and Citron will choose a high price.
Both Zipride and Citron will choose a low price.
Zipride will choose a high price, and Citron will choose a low price.
Both Zipride and Citron will choose a high price.
True or False: The game between Zipride and Citron is not an example of the prisoners' dilemma.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education