Based on the information provided in the case, illustrate the pricing game between Sony and Microsoft using a 2-by-2 payoff matrix when Sony and Microsoft charge for their games $399, or lower price to $299 as their price competition strategy

Pricing Games: Sony PlayStation and Microsoft Xbox

Exhibit 1: Prices and projected annual sales volumes for Sony PlayStation 3 and Microsoft Xbox 360 Elite

PS3 price	Xbox	PS3 projected number of units sold (millions)	Xbox projected number of units sold (millions)
$299	299	11.25	11.25
299	399	11.75	7.0
399	299	8.25	12.5
399	399	8.75	8.0

Exhibit 2: Sony PlayStation 3 Production Costs per unit in dollars

Units produced (in Millions)	8.25	8.75	9.25	9.75	10.25	10.75	11.25	11.75	12.25	12.75
Production Labor	98	80	67	55	45	38	32	28	26	28
Materials & Parts	168	161	155	145	143	141	140	140	141	142
Overhead	66.67	62.86	59.46	56.41	53.66	51.16	48.89	46.81	44.60	43.14
Distribution	40	40	40	40	40	40	40	30	30	30
Per Unit Total Cost	372.67	343.86	321.46	296.41	281.66	270.16	260.89	244.81	241.90	$243.14

Exhibit 3: Microsoft Xbox 360 Elite Production Cost per unit in dollars

Units produced (in Millions)	7.00	7.50	8.00	8.50	9.00	9.50	10.00	11.00	11.50	12.00	12.50
Production Labor	78	69	62	56	52	48	46	44	44	44	44
Materials & Parts	180	172	167	161	156	153	149	146	145	144	144
Overhead	64.29	60.00	56.25	52.94	50.00	47.37	45.00	40.91	39.13	37.50	36.00
Distribution	50	50	50	40	40	40	40	40	30	30	30
Per Unit Total Cost	372.29	351.00	335.25	309.94	298.00	288.37	280.00	270.91	258.13	255.50	254.00