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Safari File Edit View History Home Bookmarks Window Help ng.cengage.com Dashboard Reading: Principles of Economics,... D2L CENGAGE MINDTAp Module Seven Quiz MindTap - Cengage Learning Resu O Mon Apr 15 11:26AM [Solved] The oligopoly market stru... Q Search this course Richard HOME PROFILE ORDERS RENTALS COURSES Study Tools College Success Tips Career Success Tips Help SIGN OUT 2. Using a payoff matrix to determine the equilibrium outcome Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. 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 fryers. Warmbreeze Pricing A-Z High Flashfry Pricing Low High 20, 3 Low 3, 20 10, 10 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $20 million, and Warmbreeze will earn a profit of $3 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms. If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a price, and if Flashfry prices low, Warmbreeze will make more profit if it price, and if Warmbreeze prices low, Flashfry will make more profit if it chooses a price. Considering all of the information given, pricing low a dominant strategy for both Flashfry and Warmbreeze. If the firms do not collude, what strategies will they end up choosing? Flashfry will choose a high price, and Warmbreeze will choose a low price.
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