# game theory in marketing

In the limit pricing payoff matrix, Coa can choose a given row of outcomes by offering a limit price(up) or monopoly price (down). Han can choose a given column of outcomes by choosing to offer a limit price (left) or monopoly price (right). Neither firm can choose which cell of the payoff matrix to obtain; the payoff for each firm depends upon the pricing strategioes of both firms.

Han

Coa Pricing Strategy Limit Price Monopoly Price

Limit Price $1.5 billion,$3billion $2.5 billion,$2 billion

Monopoly Price $1 billion,$4 billion $1.75 billion,$3 billion

Is there a dominant strategy equilibrium in this problem? If so, what is it?

Is there a Nash equilibrium in this problem? If so, what is it?

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## SOLUTION This solution is **FREE** courtesy of BrainMass!

Dominant strategy is Limit price (you can verify that limit price is always better than monopoly price regardless of the choice of the other player).

The nash equilibrium is (limit price, limit price), and the outcome is (1.5, 3).

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