Suppose there are only two firms that sell digital cameras, Picturesque and Capturemania. 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 cameras. Picturesque Pricing firms. For example, the lower, left cell shows that if Picturesque prices low and Capturemania prices high, Picturesque will earn a profit of $15 million and Capturemania will earn a profit of $2 million. Assume this is a simultaneous game and that Picturesque and Capturemania are both profit-maximizing High Low Capturemania Pricing High Low 11,11 2,15 15, 2 8,8 If Picturesque prices high, Capturemania will make more profit if it chooses a low more profit if it chooses a low price. If Capturemania prices high, Picturesque will make more profit if it chooses a low more profit if it chooses a low price. If the firms do not collude, which strategy will they end up choosing? Considering all of the information given, pricing high is not a dominant strategy for both Picturesque and Capturemania. (Note: A dominant strategy is a strategy that is best for a player regardless of the strategies chosen by the other players.) O True price, and if Picturesque prices low, Capturemania will make False price, and if Capturemania prices low, Picturesque will make O Picturesque will choose a high price and Capturemania will choose a low price. Picturesque will choose a low price and Capturemania will choose a high price. Both Picturesque and Capturemania will choose a low price. O Both Picturesque and Capturemania will choose a high price. True or False: The game between Picturesque and Capturemania is not an example of the prisoners' dilemma.
Suppose there are only two firms that sell digital cameras, Picturesque and Capturemania. 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 cameras. Picturesque Pricing firms. For example, the lower, left cell shows that if Picturesque prices low and Capturemania prices high, Picturesque will earn a profit of $15 million and Capturemania will earn a profit of $2 million. Assume this is a simultaneous game and that Picturesque and Capturemania are both profit-maximizing High Low Capturemania Pricing High Low 11,11 2,15 15, 2 8,8 If Picturesque prices high, Capturemania will make more profit if it chooses a low more profit if it chooses a low price. If Capturemania prices high, Picturesque will make more profit if it chooses a low more profit if it chooses a low price. If the firms do not collude, which strategy will they end up choosing? Considering all of the information given, pricing high is not a dominant strategy for both Picturesque and Capturemania. (Note: A dominant strategy is a strategy that is best for a player regardless of the strategies chosen by the other players.) O True price, and if Picturesque prices low, Capturemania will make False price, and if Capturemania prices low, Picturesque will make O Picturesque will choose a high price and Capturemania will choose a low price. Picturesque will choose a low price and Capturemania will choose a high price. Both Picturesque and Capturemania will choose a low price. O Both Picturesque and Capturemania will choose a high price. True or False: The game between Picturesque and Capturemania is not an example of the prisoners' dilemma.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose there are only two firms that sell digital cameras, Picturesque and Capturemania. 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 cameras.
Picturesque Pricing
firms.
For example, the lower, left cell shows that if Picturesque prices low and Capturemania prices high, Picturesque will earn a profit of $15 million and
Capturemania will earn a profit of $2 million. Assume this is a simultaneous game and that Picturesque and Capturemania are both profit-maximizing
High
Low
Capturemania Pricing
High
Low
11, 11
2, 15
15, 2
8,8
If Picturesque prices high, Capturemania will make more profit if it chooses a low
more profit if it chooses a low price.
If Capturemania prices high, Picturesque will make more profit if it chooses a low
more profit if it chooses a low price.
If the firms do not collude, which strategy will they end up choosing?
Considering all of the information given, pricing high is not a dominant strategy for both Picturesque and Capturemania. (Note: A dominant
strategy is a strategy that is best for a player regardless of the strategies chosen by the other players.)
Both Picturesque and Capturemania will choose a low price.
O Picturesque will choose a high price and Capturemania will choose a low price.
Picturesque will choose a low price and Capturemania will choose a high price.
Both Picturesque and Capturemania will choose a high price.
O True
price, and if Picturesque prices low, Capturemania will make
O False
price, and if Capturemania prices low, Picturesque will make
True or False: The game between Picturesque and Capturemania is not an example of the prisoners' dilemma.
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