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    Westinghouse and General Electric pricing strategies

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    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 a payoff matrix which can be found in the attachment:

    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?

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    Solution Preview

    If we are looking for the same financial outcome, the high pricing strategy offers both organizations a $10M payoff in profit dollars.

    They both have a dominant strategy through the low ...