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?
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 ...