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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
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)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
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
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS