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2. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players: Movietonia and Videotech. The following

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2. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players: Movietonia and Videotech. 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. Videotech Pricing High Low High 11, 11 2, 15 Movietonia Pricing Low 15, 2 8, 8 For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms.For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million, and Videotech will earn a profit of $2 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms. If Movietonia prices high, Videotech will make more profit if it chooses a V price, and if Movietonia prices low, Videotech will make more profit if it chooses a price. If Videotech prices high, Movietonia will make more profit if it chooses a V price, and if Videotech prices low, Movietonia will make more profit if it chooses a price. Considering all of the information given, pricing low a dominant strategy for both Movietonia and Videotech. If the firms do not collude, what strategies will they end up choosing? O Movietonia will choose a low price, and Videotech will choose a high price. O Movietonia will choose a high price, and Videotech will choose a low price. Both Movietonia and Videotech will choose a low price. O Both Movietonia and Videotech will choose a high price. True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma. O True O False

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