Intel and AMD must decide on a pricing strategy for their microchip processors. Their respective marketing...

 

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Intel and AMD must decide on a pricing strategy for their microchip processors. Their respective marketing departments have determined two potential prices, one high and one low. The payoffs (in millions of dollars) are summarized in the table below. AMD High Price 70, 25 65, 55 Low Price Intel Low Price High Price 35, 30 30, 60 The unique Nash equilibrium in the static (one period) game is for both firms to choose the high price. O If the game lasts for two periods then one possible Nash equilibrium is for each firm to charge a high price in the first period and defect to the low price in the second period. In the static (one period) game, there is a unique Nash equilibrium but the game is not a prisoners' dilemma. O If the game is repeated indefinitely, then it is possible that Intel could earn a payoff of 65 every period in equilibrium. Intel and AMD must decide on a pricing strategy for their microchip processors. Their respective marketing departments have determined two potential prices, one high and one low. The payoffs (in millions of dollars) are summarized in the table below. AMD High Price 70, 25 65, 55 Low Price Intel Low Price High Price 35, 30 30, 60 The unique Nash equilibrium in the static (one period) game is for both firms to choose the high price. O If the game lasts for two periods then one possible Nash equilibrium is for each firm to charge a high price in the first period and defect to the low price in the second period. In the static (one period) game, there is a unique Nash equilibrium but the game is not a prisoners' dilemma. O If the game is repeated indefinitely, then it is possible that Intel could earn a payoff of 65 every period in equilibrium.

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