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:

Employee Fraud

Dishonest activities conducted by employees to provide them with an advantage, financial or otherwise, at the expense of their employer.

Inventories

Goods and materials that a business holds for the purpose of resale or production.

Manufacturers

Manufacturers are entities engaged in the transformation of raw materials or components into finished goods that are sold to consumers, businesses, or other manufacturers.

Product Costs

The total expenses incurred to produce a product including direct materials, direct labor, and manufacturing overhead.