4. Using a payoff matrix to determine the equilibrium outcome Suppose there are

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4. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smartphones: Flashfone and Pictech. 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 phones Pictech Pricing Low High 1111 3,15 9,9 High Flashfone Pricing Low 15, 3 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $15 million, and Pictech will earn a profit of $3 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses a price If Pictech prices high, Flashfone will make more profit if it chooses a price, and if Pictech prices low, Flashfone will make more profit if it chooses a price Considering all of the information given, pricing low a dominant strategy for both Flashfone and Pictech If the firms do not collude, what strategies will they end up choosing? O Flashfone will choose a low price, and Pictech will choose a high price Both Flashfone and Pictech will choose a high price O Flashfone will choose a high price, and Pictech will choose a low price O Both Flashfone and Pictech will choose a low price

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