Westinghouse and General Electric are competing on the newest version of clothes washer and dryer combinations. Two pricing strategies exist: price high or price low. The profit from each of the four possible combinations of decisions is given in the following payoff matrix:

a) Which strategy offers both Westinghouse and General Electric the best financial outcome?
b) Does either firm have a dominant strategy? If yes, which firm and what strategy?
c) The Nash equilibrium is for Westinghouse to set its price at _______ and earn a profit of _______ and for General Electric to set its price at ________ and earn a profit of _________.
d) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?

  • CreatedAugust 05, 2013
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