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. Capturemania Pricing High Low High 9,9 2, 15 Picturesque Pricing Low 15, 2 8, 8 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 firms. If Picturesque prices high, Capturemania will make more profit if it chooses a price, and if Picturesque prices low, Capturemania will make more profit if it chooses a price. If Capturemania prices high, Picturesque will make more profit if it chooses a price, and if Capturemania prices low, Picturesque will make more profit if it chooses a price. Considering all of the information given, pricing low 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.)

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. Capturemania Pricing High Low High 9,9 2, 15 Picturesque Pricing Low 15, 2 8, 8 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 firms. If Picturesque prices high, Capturemania will make more profit if it chooses a price, and if Picturesque prices low, Capturemania will make more profit if it chooses a price. If Capturemania prices high, Picturesque will make more profit if it chooses a price, and if Capturemania prices low, Picturesque will make more profit if it chooses a price. Considering all of the information given, pricing low 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.)

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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