6. Using a payoff matrix to determine the equilibrium outcome Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for scooters. Citron Pricing High Low High 11__ 11 2, 15 Zipride Pricing Low 15, 2 a. a For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $15 million, and Citron will eam a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both profitmaximizing firms. If Zipride prices high, Citron will make more prot if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. If Citron prices high, Zipn'de will make more prot if it chooses a V price, and if Citron prices low, Zipride will make more prot if it chooses a V price. Considering all of the information given, pricing high V a dominant strategy for both Zipride and Citron. If the rms do not collude, what strategies will they end up choosing? O Zipride will choose a low price, and Citron will choose a high price. 0 Both Zipride and Citron will choose a low price. 0 Zipride will choose a high price, and Citron will choose a low price. For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a prot of $15 million, and Citron will earn a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both protmaximizing rms. If Zipride prices high, Citron will make more prot if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. If Citron prices high, Zipride will make more prot if it chooses a V price, and if Citron prices low, Zipride will make more prot if it chooses a V price. Considering all of the information given, pricing high V a dominant strategy for both Zipride and Citron. If the rms do not collude, what strategies will they end up choosing? O Zipride will choose a low price, and Citron will choose a high price. 0 Both Zipride and Citron will choose a low price. O Zipride will choose a high price, and Citron will choose a low price. O Both Zipride and Citron will choose a high price. True or False: The game between Zipride and Citron is an example of the prisoners' dilemma. O TnJe O False For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $15 million, and Citron will earn a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing rms. If Zipride prices high, Citron will make more prot if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. If Citron prices high, Zipride will make more prot if it chooses a 'ce, and if Citron prices low, Zipride will make more prot if it chooses a V price. Considering all of the information given, pricing high V a dominant strategyr for both Zipride and Citron. If the rms do not collude, what strategies will they end up choosing? For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $15 million, and Citron will earn a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both profitmaximizing rms. If Zipride prices high, Citron will make more prot if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. prices high, Zipride will make more prot if it chooses a V price, and if Citron prices low, Zipride will make more prot if it chooses a ice- Considering all of the information given, pricing high V a dominant strategy for both Zipride and Citron. If the rms do not collude, what strategies will they end up choosing? For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $15 million, and Citron will earn a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both profitmaximizing rms. If Zipride prices high, lCitron will make more profit if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. If Citron prices high, Zipnde will make more prot if it chooses a V price, and if Citron prices low, Zipride will make more prot if it chooses a V price. Considering all of the information given, pricing high V a do ategy for both Zipride and Citron. If the rms do not collude, what strategies will they end up choosing? For example, the lowerleft cell shows that if Zipride prices low and Citron prices high, Zipride will earn a prot of $15 million, and Citron will earn a profit of $2 million. Assume this is a simultaneous game and that Zipride and Citron are both protmaximizing rms. If Zipride prices high, Citron will make more prot if it chooses a V price, and if Zipride prices low, Citron will make more prot if it chooses a V price. If Citron prices high, Zipride will make more prot if it chooses a V price, and if Citron prices low, Zipride will make more prot if it chooses a ilprice. ing all of the information given, pricing high V a dominant strategy for both Zip-ride and Citron. ms do not collude, what strategies will theyr end up choosing? O Zipride will choose a low price, and Citron will choose a high price. Considering all of the information given, pricing high a dominant strategy for both Zipride and Citron. If the firms do not collude, what strategies will they is hoosing? is not O Zipride will choose a low price, and Citron se a high price. O Both Zipride and Citron will choose a low price. O Zipride will choose a high price, and Citron will choose a low price. O Both Zipride and Citron will choose a high price.8. Collusive outcome versus Nash equilibrium Suppose there is a remote stretch of highway along which two restaurants, Last Chance Cafe and Desolate Diner, operate in a duopol'y. Neither restaurant invests in keeping up with health code regulations, but regardless they both have customers as they are the only dining options along a 1'9 mile portion of the road. Both restaurants know that it they clean up and comply with health codes they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $12,000; alternatively, if they both hire workers to clean, each will earn only $9,000. However, it one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $17,000, and the other restaurant will make only $5,000. Complete the following payoff matrix using the information just given. (Note: Last Chance Cafe and Desolate Diner are both protmaximizing rms. ) Desolate Diner Cleans Up Doesn't Clean Up CleansUp IS I IS I IS IIS I Last Chance Caf Doesn't Clean Up IS I IS I IS I S I It Last Chance Cafe and Desolate Diner decide to collude, the outcome of this game is as follows: Last Chance Cafe V and Desolate Diner V . If both restaurants decide to cheat and behave noncooperatively, the outcome reecting the unique Nash equilibrium of this game is as follows: Last Chance Cate V , and Desolate Diner V . Complete the following payoff matrix using the information just given. (Note: Last Chance Cafe and Desolate Diner are both profit-maximizing firms.) Desolate Diner Cleans Up Doesn't Clean Up Cleans Up $ $ $ Last Chance Cafe Doesn't Clean Up $ $ $ $ If Last Chance Cafe and Desolate Diner decide to collude, the outcome of this game is as follows: Last Chance Cafe and Desolate Diner If both cleans de to cheat and behave noncooperatively, the outcome reflecting the unique Nash equilibrium of this game is as follows: Last Chang does not clean , and Desolate Diner