There are two competing firms, Jack and Jill represents a normal form of a game of two firms that produce a widget that is identical in quality. The rows in the table below correspond to the two different strategies available to firm Jack: price High or Low. The columns correspond to the same strategies for Jill: price High or price Low. The numbers in the tables show the profits. The number on the left (first number) is Jack firm profit, and the numbers on the right (second number) is Jill’s firm profit in millions of dollars. For example, If both price High (the upper left cell), then they each get 10 million in profits. If a firm prices high, the other firm prices low, consumers will have a choice to go to the low firm and the firm that prices high will get zero while the firm that prices low will get all market share. The game is played simultaneously, meaning same time and neither will know what the decision is. JILL Price High Price Low Price High 10, 10 0, 20 JACK Price Low 20, 0 7, 7 a. What would be the most likely outcome b. How can the firms get to a better outcome. In other words, what in the game needs to change to get to the optimal outcome if possible?
There are two competing firms, Jack and Jill represents a normal form of a game of two firms that produce a widget that is identical in quality. The rows in the table below correspond to the two different strategies available to firm Jack: price High or Low. The columns correspond to the same strategies for Jill: price High or price Low. The numbers in the tables show the profits. The number on the left (first number) is Jack firm profit, and the numbers on the right (second number) is Jill’s firm profit in millions of dollars. For example, If both price High (the upper left cell), then they each get 10 million in profits.
If a firm prices high, the other firm prices low, consumers will have a choice to go to the low firm and the firm that prices high will get zero while the firm that prices low will get all market share.
The game is played simultaneously, meaning same time and neither will know what the decision is.
JILL
Price High Price Low
Price High 10, 10 0, 20
JACK
Price Low 20, 0 7, 7
a. What would be the most likely outcome
b. How can the firms get to a better outcome. In other words, what in the game needs to change to get to the optimal outcome if possible?
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