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Objective of Assignment: Understand the Dilemma game and its applicability in the context of pricing. You will be asked to complete a 2-by-2 payoff matrix

Objective of Assignment: Understand the Dilemma game and its applicability in the context of pricing. You will be asked to complete a 2-by-2 payoff matrix for pricing of Sony's PlayStation 3 and Microsoft's Xbox Elite. Understand the relationship between own-price elasticity of demand and short-run profit maximization. Use the 2-by-2 one-shot simultaneous game below to analyze Sony's and Microsoft's short-run pricing decision. First, calculate short-run profits for each firm for both prices -- you will be calculating 8 profit scenarios (4 for each firm). Assuming this is a short-run pricing decision, so variable costs, not fixed costs, are most relevant. Please consider production labor, materials and parts, and distribution as variable costs

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