ElectroWorld and Galaxy Appliance are competing retail stores that tacitly bargain with each other in deciding pricing
Question:
ElectroWorld and Galaxy Appliance are competing retail stores that tacitly bargain with each other in deciding pricing policies. Each can either price high or price low. If both price high, payoffs to each are $50 million; if one prices high and the other low, the low-pricer gains $70 million and the high-pricer gains $30 million. If both price low, each gains $40 million. Model this situation as a 2 × 2 game, and identify the equilibrium. How would this change if each of the retailers, as part of the bargaining, committed to a price-matching guarantee, where one would match any low price from the other?
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Related Book For 
Managerial Economics A Problem-Solving Approach
ISBN: b00btm8fk0
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Authors: Luke M. Froeb, Brain T. Mccann
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