Table 11-5 Table 11-5 Shows the Payoff Matrix for Wal-Mart

question 180

Multiple Choice

Table 11-5 Table 11-5 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-5.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:

Parietal Cells

Cells in the lining of the stomach that produce hydrochloric acid and intrinsic factor, crucial for digestion and B12 absorption.

Goblet Cells

Goblet cells are specialized epithelial cells found in the respiratory and digestive tracts, secreting mucus to lubricate and protect the mucous membranes.

Tube-Within-a-Tube

A body plan characteristic of many animals, where the inner tube represents the digestive tract and the outer tube the body wall, with a cavity in between.

Body Wall

The outermost layer of an organism's body, which provides structural support and protection; in many invertebrates, it consists of a cuticle or exoskeleton.