Secure Strategies

question 8

Essay

Secure Strategies. Imagine two competitors, Microsoft Corp. and Google, Inc., each facing an important strategic decision concerning the pricing of Internet search technology. Microsoft can choose either row in the payoff matrix defined below, whereas Google can choose either column. For Microsoft and Google, the choices are either "market penetration pricing" or "monopoly pricing." Notice that neither firm can unilaterally choose a given cell in the profit payoff matrix. The ultimate result of this one-shot, simultaneous-move game depends upon the choices made by both competitors. In this payoff matrix, the first number in each cell is the profit payoff to Microsoft; the second number is the profit payoff to Google.

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Definitions:

Marginal Tax Rate

The percentage of tax applied to an individual's or entity's income for each additional unit of income.

Taxable Income

The amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year.

Progressive Tax

A tax system in which the tax rate increases as the taxable amount increases, typically imposing higher rates on those with higher incomes.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary according to income level, type of taxpayer, and jurisdiction.