The Payoff Table Below Depicts Price Competition Between Two Electronics

question 27

Essay

The payoff table below depicts price competition between two electronics stores. (Payoffs are weekly profits in thousands of dollars for each store.)
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Circuit City's Prices }\\\begin{array} { | c | c | c | c | } \hline \text { Best Buy's Prices } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { High } & 100,100 & 75,120 & 70,90 \\\hline \text { Medium } & 120,65 & 80,80 & 65,110 \\\hline \text { Low } & 110,50 & 85,75 & 60,60 \\\hline\end{array}\end{array}$ (a) The stores determine their strategies independently of one another. What are the stores' respective equilibrium strategies? Explain briefly.
(b) Suppose that each store adopts a price matching strategy such that each pledges to instantly match any lower price by its rival. What will be the effect on the stores’ chosen prices? Will consumers benefit from such policies? Explain riefly.

---

Definitions:

Socialization

Socialization is the process by which individuals learn and adopt the norms, values, behaviors, and social skills appropriate to their society or culture.

Withdrawal Of Love

A psychological condition or tactic where a person's affection, support, or comfort is intentionally withheld as a means of punishment or emotional manipulation.

Ethnic Identity

Ethnic identity is an individual's sense of belonging to a specific ethnic group, including aspects of culture, heritage, language, and traditions.

Cultural Conflict

A struggle or disagreement arising from differences in cultural values, beliefs, and practices between individuals or groups.