Question

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 $2 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 (high,low) _____ price, and if Flashfone prices low, Pictech will make more profit if it chooses a(high,low)_______ price.

If Pictech prices high, Flashfone will make more profit if it chooses a(high,low)______price, and if Pictech prices low, Flashfone will make more profit if it chooses a (high,low) ______ price.

Considering all of the information given, pricing high (is, is not) ______ a dominant strategy for both Flashfone and Pictech. (Note: A dominant strategy is a strategy that is best for a player regardless of the strategies chosen by the other players.)

If the firms do not collude, which strategy will they end up choosing?

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 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.

a.True
b.False

Answer 1

Answer:

Both Flashfone and Pictech will choose a low price.

a.True

Explanation:

By both of them lowering their prices, they can both earn more, but they damage the market, because Pictech will be lowering their prices, thus Flashfone will start to sell less, so the total revenue of the market wil be lowered, but the earnings og Pictech will go up, instead of eing 17 million between both it will decrease, in the normal both will choose a low price to maximize their sells and profits.