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Questions 1. Given the information in Exhibits 1, 2, and 3, would you predict that Sony and/or Microsoft will want to reduce console prices by
Questions 1. Given the information in Exhibits 1, 2, and 3, would you predict that Sony and/or Microsoft will want to reduce console prices by $100? Use a 2-by-2 one-shot simultaneous game to analyze this short-run situation. You can assume Nintendo monitors its competitors' actions, but has no plans to change its price. 2. Assume that demand curves are all linear. Calculate the own-price point elasticities of demand implied by the data at prices of $299 and $399 for both Sony and Microsoft. Are your answers consistent with your understanding of short-run profit maximization for firms with market power? 3. Can you think of reasons why these firms would be particularly aggressive in pricing their consoles
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