Westinghouse and General Electric are competing on the newest version of clothes washer and dryer combinations. Two pricing strategies exist: price high or price low. The profit from each of the four possible combinations of decisions is given in the following payoff matrix:

a) Which strategy offers both Westinghouse and General Electric the best financial outcome?
b) Does either firm have a dominant strategy? If yes, which firm and what strategy?
c) The Nash equilibrium is for Westinghouse to set its price at _______ and earn a profit of _______ and for General Electric to set its price at ________ and earn a profit of _________.
d) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?

Transcribed Image Text:

Westinghouse's price siti High (S4000) Low (S2000) High W: $10,000,000 W: $16,000,000 General (S4000) Electric's GE: S10,000,000 GE: $4,000,000 W: $4,000,000 LowW: S-4,000,000 (S2000) GE: S16,000,000 GE: S4,000,000 Payoffs in dollars of profirt.