Suppose there are only two firms that sell Blu-ray players, Movie tonier and Vid

Question

Suppose there are only two firms that sell Blu-ray players, Movie tonier and Videojet. 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 players. For example, the lower-left cell shows that if Movie tonic prices low and Videojet paces high, Movie tonic will earn a profit of $15 million and Videojet will earn a profit of $2 million. Assume this is a simultaneous game and that Movie tonic and Videojet are both profit-maximizing firms. If Movie tonic prices high, Videojet will make more profit if it chooses a price, and if Movie tonic prices low. Videojet will make more profit if it chooses a price. If Video tech prices high, Movie tonic will make more profit if it chooses a price, and if Video tech prices low, Movie tonic will make more profit if it chooses a price. Considering all of the information given, pricing high a dominant strategy for both Movie tonic and Video tech. If the firms do not collude, what strategies will they end up choosing? True or False: The game between Movie tonic and Video tech is an example of the prisoners' dilemma.

Explanation / Answer

Movietonia will choose a low price and videotech will choose high price.

True

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.