(Table) HH Gregg and Best Buy Are Competing for Sales

question 41

Multiple Choice

(Table) HH Gregg and Best Buy are competing for sales for their newest high-capacity mobile device battery packs. Each firm has a pricing strategy of either a high price or a low price. Profits for each store are listed in the payoff boxes, with Best Buy's payoff listed first. Based on the table, why is the game characterized as a prisoner's dilemma game?
$\begin{array}{c}\quad \quad \quad \quad \quad \quad \quad \quad \text { HH Gregg }\\\begin{array}{ccc} \text { Best Buy }\\&& \text { High } & \text { Low } \\&\text { High } & 100,100 & 30,120 \\&\text { Low } & 120,30 & 50,50\end{array}\end{array}$

• A) Given dominant strategies, only Best Buy is able to achieve a high-profit outcome.
• B) HH Gregg is forced into keeping prices high; hence, it is held "prisoner."
• C) There exists a mutually better outcome for both players as long as one player deviates from the Nash equilibrium.
• D) There exists a mutually better outcome for both players; however, it is not rational to play the strategies that result in this outcome (which requires collusion) in a one-time game.

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Definitions:

Sampling Distribution

The probability distribution of a given statistic based on a random sample, underlying the principle of estimation in inferential statistics.

Mean

The arithmetic average of a set of numeric values, calculated by adding all the values together and dividing by the number of values.

Infinite Population

A theoretical or practical concept where the population size approaches infinity, making it impractical or impossible to study every individual in the population.

Standard Deviation

A metric assessing how greatly a collection of numbers diverges from their average value, reflecting the range of difference from the mean.