Suppose there are only two firms that sell smartphones, Flashfone and Pictech. T
ID: 1199784 • Letter: S
Question
Suppose there are only two firms that sell smartphones, Flashfone and Pictech. The payoff matrix that follows shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $8 million and Pictech will earn a profit of $1 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? Both Flashfone and Pictech will choose a low price. Flashfone will choose a low price and Pictech will choose a high price. Flashfone will choose a high price and Pictech will choose a low price. Both Flashfone and Pictech will choose a high price. True or False: The game between Flashfone and Pictech is an example of the Prisoners' Dilemma.Explanation / Answer
If Flashfone prices high, Pichtech will make more profit if it chooses a low price, and if Flashfone prices low, Pichtech will make profit if it chooses a low price.
If pichtech prices high, flashfone will make more profit if it chooses a low price, and if Pichtech prices low,Flashfone will make more profit if it chooses a low price.
considering all of the information given, pricing low is a dominant strategy for bothFlashfone and Pichtech.
if the firms do not collude,
a) both Flashfone and pichtech will choose a low price
the game between Flashfone and Pictech is an example of the Prisoner's dilemma
True
because if both firms cooperate and collude, bothe will gain by charging higher price
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