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. High Movietonia Pricing Low Videotech Pricing High Low 11, 11 2,15 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. if Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high of Videotech prices high, Movietonia will make more profit if it chooses a low price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. Both Movietonia and Videotech will choose a low price. : True False True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.
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. High Movietonia Pricing Low Videotech Pricing High Low 11, 11 2,15 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. if Movietonia prices high, Videotech will make more profit if it chooses a more profit if it chooses a price. high of Videotech prices high, Movietonia will make more profit if it chooses a low price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will they end up choosing? price, and if Movietonia prices low, Videotech will make a dominant strategy for both Movietonia and Videotech. Movietonia will choose a high price and Videotech will choose a low price. Movietonia will choose a low price and Videotech will choose a high price. Both Movietonia and Videotech will choose a high price. Both Movietonia and Videotech will choose a low price. : True False True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
CS 13
Subject - economics
![2. Using a payoff matrix to determine the equilibrium outcome
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.
Movietonia Pricing
Videotech Pricing
High
Low
11, 11
2,15
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.
High
Low 15, 2
If Movietonia prices high, Videotech will make more profit if it chooses a
more profit if it chooses a
price.
high
If Videotech prices high, Movietonia will make more profit if it chooses a low
more profit if it chooses a
price.
Considering all of the information given, pricing high
If the firms do not collude, what strategies will they end up choosing?
True
Movietonia will choose a high price and Videotech will choose a low price.
Movietonia will choose a low price and Videotech will choose a high price.
Both Movietonia and Videotech will choose a high price.
1 Both Movietonia and Videotech will choose a low price.
False
price, and if Movietonia prices low, Videotech will make
a dominant strategy for both Movietonia and Videotech.
price, and if Videotech prices low, Movietonia will make
True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F81206221-7ef3-45b8-bcef-ee5db0e174f5%2F547c551c-f710-43b7-aeda-68a2b7c07b3d%2F89tdo6p_processed.png&w=3840&q=75)
Transcribed Image Text:2. Using a payoff matrix to determine the equilibrium outcome
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.
Movietonia Pricing
Videotech Pricing
High
Low
11, 11
2,15
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.
High
Low 15, 2
If Movietonia prices high, Videotech will make more profit if it chooses a
more profit if it chooses a
price.
high
If Videotech prices high, Movietonia will make more profit if it chooses a low
more profit if it chooses a
price.
Considering all of the information given, pricing high
If the firms do not collude, what strategies will they end up choosing?
True
Movietonia will choose a high price and Videotech will choose a low price.
Movietonia will choose a low price and Videotech will choose a high price.
Both Movietonia and Videotech will choose a high price.
1 Both Movietonia and Videotech will choose a low price.
False
price, and if Movietonia prices low, Videotech will make
a dominant strategy for both Movietonia and Videotech.
price, and if Videotech prices low, Movietonia will make
True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.
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