Question

In: Economics

The following matrix shows strategies and payoffs for two firms that must decide how to price...

  1. The following matrix shows strategies and payoffs for two firms that must decide how to price their products.

Firm 1 _____________________________________________________________________________________

                                          Price High                                                    Price Low

Firm 2             Price High                        200. 200                                                       50,   300

                        Price Low                         300, 50                                                         120, 120

  1. Is there a dominant strategy? If so, what is it?
  2. Is there a Nash equilibrium? If so, what is it?
  3. Is this a Prisoner’s Dilemma Game? Why?

  1. Suppose MC = $10. Given each of the following price elasticities compute the profit-maximizing price and the optimal markup.
  1. -5
  2. -4
  3. -3

Solutions

Expert Solution

Rahul Sunny answered 8 months ago
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