Homework Help is Here – Start Your Trial Now!
Business
Economics
(Table 12.6) Payoffs represent profits in thousands. Fruit of the Loom T-Shirt Price $8 $6 Hanes T- $8 20, 20 15, 22 Shirt Price $6 22,15 17, 17 $4 19, 10 15, 16 What is the Nash equilibrium? O (14, 14) O (19, 10) or (10, 19) O (17,17) O (20,20) $4 10, 19 16, 15 14, 14 D

(Table 12.6) Payoffs represent profits in thousands. Fruit of the Loom T-Shirt Price $8 $6 Hanes T- $8 20, 20 15, 22 Shirt Price $6 22,15 17, 17 $4 19, 10 15, 16 What is the Nash equilibrium? O (14, 14) O (19, 10) or (10, 19) O (17,17) O (20,20) $4 10, 19 16, 15 14, 14 D

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
Section: Chapter Questions
Problem 9PA
See similar textbooks
icon
Related questions
Question
15
### Pricing Strategy for T-Shirts: A Game Theory Perspective **Table 12.6: Payoffs Represent Profits in Thousands** #### Payoff Matrix | Hanes T-Shirt Price | Fruit of the Loom $8 | Fruit of the Loom $6 | Fruit of the Loom $4 | |---------------------|----------------------|----------------------|----------------------| | **$8** | 20, 20 | 15, 22 | 10, 19 | | **$6** | 22, 15 | 17, 17 | 16, 15 | | **$4** | 19, 10 | 15, 16 | 14, 14 | Each cell in the table represents the profits in thousands of dollars for Hanes (left value) and Fruit of the Loom (right value) given different pricing combinations for T-Shirts. ### Key Question: What is the Nash Equilibrium? The Nash equilibrium represents the pricing strategy where neither company can increase their profit by unilaterally changing their price, provided the price of the competitor remains unchanged. #### Options: - (14, 14) - (19, 10) or (10, 19) - (17, 17) - (20, 20) ### Analysis: Selecting a Nash equilibrium involves identifying a strategy combination where neither firm can improve its payoff given the strategy of the other. Let's analyze the given payoffs: - **(20, 20):** If Hanes chooses $8 and Fruit of the Loom chooses $8, both stay at 20, 20. However, if either changes their price, their profit could be improved in some scenarios. - **(19, 10) or (10, 19):** This pair does not stabilize as both companies find benefits in switching strategies. - **(17, 17):** This represents a stable state where neither company benefits from changing their price unilaterally. - **(14, 14):** Similarly stable, but lower profit compared to (17, 17). ### Conclusion: Given the analysis, the Nash equilibrium for this scenario is most likely to be the one that provides stability while offering reasonably high profits for both companies. **Correct Choice:** (17, 17) Be sure to consider the strategic interdependence where both companies find it optimal not to deviate from the
Transcribed Image Text:### Pricing Strategy for T-Shirts: A Game Theory Perspective **Table 12.6: Payoffs Represent Profits in Thousands** #### Payoff Matrix | Hanes T-Shirt Price | Fruit of the Loom $8 | Fruit of the Loom $6 | Fruit of the Loom $4 | |---------------------|----------------------|----------------------|----------------------| | **$8** | 20, 20 | 15, 22 | 10, 19 | | **$6** | 22, 15 | 17, 17 | 16, 15 | | **$4** | 19, 10 | 15, 16 | 14, 14 | Each cell in the table represents the profits in thousands of dollars for Hanes (left value) and Fruit of the Loom (right value) given different pricing combinations for T-Shirts. ### Key Question: What is the Nash Equilibrium? The Nash equilibrium represents the pricing strategy where neither company can increase their profit by unilaterally changing their price, provided the price of the competitor remains unchanged. #### Options: - (14, 14) - (19, 10) or (10, 19) - (17, 17) - (20, 20) ### Analysis: Selecting a Nash equilibrium involves identifying a strategy combination where neither firm can improve its payoff given the strategy of the other. Let's analyze the given payoffs: - **(20, 20):** If Hanes chooses $8 and Fruit of the Loom chooses $8, both stay at 20, 20. However, if either changes their price, their profit could be improved in some scenarios. - **(19, 10) or (10, 19):** This pair does not stabilize as both companies find benefits in switching strategies. - **(17, 17):** This represents a stable state where neither company benefits from changing their price unilaterally. - **(14, 14):** Similarly stable, but lower profit compared to (17, 17). ### Conclusion: Given the analysis, the Nash equilibrium for this scenario is most likely to be the one that provides stability while offering reasonably high profits for both companies. **Correct Choice:** (17, 17) Be sure to consider the strategic interdependence where both companies find it optimal not to deviate from the
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Current Account
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 Microeconomics
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
Economics
ISBN:
9781285635101
Author:
MCEACHERN
Publisher:
Cengage
ECON MICRO
ECON MICRO
Economics
ISBN:
9781337000536
Author:
William A. McEachern
Publisher:
Cengage Learning
Microeconomic Theory
Microeconomic Theory
Economics
ISBN:
9781337517942
Author:
NICHOLSON
Publisher:
Cengage
Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS