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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
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. For example, the lower-left 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 firms. If Zipride prices high, Citron will make more profit if it chooses a price, and if Zipride prices low, Citron will make more profit if it chooses a price. If Citron prices high, Zipride will make more profit if it chooses a price, and if Citron prices low, Zipride will make more profit if it chooses a price. Considering all of the information given, pricing low a dominant strategy for both Zipride and Citron. If the firms do not collude, what strategies will they end up choosing? Both Zipride and Citron will choose a high price. Zipride will choose a low price, and Citron will choose a high price. Zipride will choose a high price, and Citron will choose a low price. Both Zipride and Citron will choose a low price. True or False: The game between Zipride and Citron is not an example of the prisoners' dilemma. True False
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