Suppose there are only two firms that sell tablets, Padmania and Capturesque. The payoff matrix below shows the profits (in millions of dollars) each company will earn depending on whether it sets a high or low price for its tablets. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $15 million and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and Padmania and Capturesque are both profit-maximizing firms.

Capturesque
Padmania high price low price
high price 11,11 2,15
low price 15, 2 8, 8

1. If Padmania prices high, Capturesque will make more profit if it chooses a ___ price, and if Padmania prices low, Capturesque will make more profit if it chooses a _ price.
2. If Capturesque prices high, Padmania will make more profit if it chooses a _ price, and if Capturesque prices low, Padmania will make more profit if it chooses a _ price.
3. Considering all of the information given, pricing low ___ a dominant strategy for both Padmania and Capturesque.
4. If the firms do not collude, what strategies will they end up choosing?
a. Both Padmania and Capturesque will choose a low price.
b. Padmania will choose a high price and Capturesque will choose a low price.
c. Both Padmania and Capturesque will choose a high price.
d. Padmania will choose a low price and Capturesque will choose a high price.
5. True or False: The game between Padmania and Capturesque is an example of the prisoners' dilemma.

Question

Jrorockets90421 Jrorockets90421

28-02-2021
Business

contestada

Suppose there are only two firms that sell tablets, Padmania and Capturesque. The payoff matrix below shows the profits (in millions of dollars) each company will earn depending on whether it sets a high or low price for its tablets. For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $15 million and Capturesque will earn a profit of $2 million. Assume this is a simultaneous game and Padmania and Capturesque are both profit-maximizing firms.

Capturesque
Padmania high price low price
high price 11,11 2,15
low price 15, 2 8, 8

1. If Padmania prices high, Capturesque will make more profit if it chooses a ___ price, and if Padmania prices low, Capturesque will make more profit if it chooses a _ price.
2. If Capturesque prices high, Padmania will make more profit if it chooses a _ price, and if Capturesque prices low, Padmania will make more profit if it chooses a _ price.
3. Considering all of the information given, pricing low ___ a dominant strategy for both Padmania and Capturesque.
4. If the firms do not collude, what strategies will they end up choosing?
a. Both Padmania and Capturesque will choose a low price.
b. Padmania will choose a high price and Capturesque will choose a low price.
c. Both Padmania and Capturesque will choose a high price.
d. Padmania will choose a low price and Capturesque will choose a high price.
5. True or False: The game between Padmania and Capturesque is an example of the prisoners' dilemma.

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ewomazinoade ewomazinoade · Answer 1 · 2021-03-01T02:46:47+01:00

Answer:

low low

2. low low

3. pricing low is a dominant strategy for Padmania and Capturesque.

4. price low

5. yes

Explanation:

Game theory looks at the interactions between participants in a competitive game and calculates the best choice for the player.

Dominant strategy is the best option for a player regardless of what the other player is playing.

Nash equilibrium is the best outcome for players where no player has an incentive to change their decisions.

A prisoner's dilemma is when there is a motivation for a player to make a decision that would create a less optimal outcome for other players

If Padmania prices high, Capturesque can either charge low or high. If it charges low, it would earn 15 and if it charges high, it would earn 11. It is better to charge low.

if Padmania prices low, Capturesque can either charge low or high. If it charges low, it would earn 8 and if it charges high, it would earn 2. It is better to price low

If Capturesque prices high, Padmania can either charge low or high. If it charges low, it would earn 15 and if it charges high, it would earn 11. It is better to charge low.

If Capturesque prices low, Padmania can either charge low or high. If it charges low, it would earn 8 and if it charges high, it would earn 2. It is better to charge low.