Dell and HP Must Both Simultaneously Prices for Their New

question 1

Multiple Choice

Dell and HP must both simultaneously prices for their new laptops.They can both either choose to set a Low or High price.The payoffs are as follows.If both firms set a Low price, Dell gets 5 and HP 6.If both firms set a High price, the payoffs are 7 to Dell and 8 to HP.If Dell sets a High price and HP chooses Low, the payoffs are 3 to Dell and 10 to HP.If Dell sets a Low price and HP opts for High, the payoffs are 9 to Dell and 1 to H.What statement is true?

• A)Dell has a dominant strategy, but HP does not have a dominant strategy.
• B)The dominant strategy equilibrium is (Low, Low).
• C)Each firm has a dominant strategy; this game is a prisoners' dilemma.
• D)b and c are true.
• E)Neither player has a dominant strategy; this is a prisoner's dilemma.

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Definitions:

Fixed Expenses

Expenses that remain constant regardless of variations in the level of production or the volume of sales, like lease payments or wages.

Degree Of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, indicating the impact of fixed costs on earnings.

Variable Expenses

Expenses that vary directly with the amount of activity or production volume.

Fixed Expenses

Expenses that do not change with the level of production or sales, remaining constant regardless of business activity levels.