Suppose two companies, Sony and Magnavox, are competing in a duopoly. If both companies charge a high price, they each earn $700 million in economic profit. If both companies charge a low price, they each earn $500 million in economic profit. If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit.
a. Complete the payoff matrix below for Sony and Magnavox.

b. Find the Nash equilibrium.

Question

Suppose two companies, Sony and Magnavox, are competing in a duopoly. If both companies charge a high price, they each earn $700 million in economic profit. If both companies charge a low price, they each earn $500 million in economic profit. If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit.
a. Complete the payoff matrix below for Sony and Magnavox.
  
b. Find the Nash equilibrium.

Quizplus · Accepted Answer

The Answer of Suppose two companies, Sony and Magnavox, are competing in a duopoly. If both companies charge a high price, they each earn $700 million in economic profit. If both companies charge a low price, they each earn $500 million in economic profit. If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit.
a. Complete the payoff matrix below for Sony and Magnavox.
  
b. Find the Nash equilibrium.

Suppose Two Companies, Sony and Magnavox, Are Competing in a Duopoly