Table 11-7 Table 11-7 Shows the Payoff Matrix for Walmart

question 345

Multiple Choice

Table 11-7
Table 11-7 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.Is the current strategy in which each firm charges the low price and earns a profit of $7,000 a Nash equilibrium? If not,why and what is the Nash equilibrium?

• A) No, it is not a Nash equilibrium because each firm can do better by charging the high price. The Nash equilibrium occurs when each firm charges the high price and earns a profit of $10,000.
• B) No, the current situation is not a Nash equilibrium; it is a dominant strategy equilibrium. There is no Nash equilibrium in this game.
• C) No, the current situation is not a Nash equilibrium. The Nash equilibrium for each firm is to have the other charge a high price and for the firm in question charge a low price.
• D) Yes, the current situation is a Nash equilibrium.

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Definitions:

Automated Clearing House

An electronic network for financial transactions, used for the transfer of funds between bank accounts, including direct deposits and bill payments.

Source Documentation

The original records and documents related to a study, project, or transaction, serving as evidence for claims and conclusions.

Fraudulent Misstatements

False or misleading statements made intentionally to deceive others.

Stop-payment Order

A request made to a bank by an account holder to not pay a check that has been issued or to halt a payment that has been preauthorized.