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.
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?© BrainMass Inc. brainmass.com December 24, 2021, 8:50 pm ad1c9bdddf
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).© BrainMass Inc. brainmass.com December 24, 2021, 8:50 pm ad1c9bdddf>