Refer to Scenario 13.16. If Gooi moves first, the payoff in equilibrium will be:

A) $150, $0.
B) $150, $300.
C) $400, $150.
D) $50, $50.
E) $650, $450.

Question

Refer to Scenario 13.16. If Gooi moves first, the payoff in equilibrium will be:A)  $150, $0.B)  $150, $300.C)  $400, $150.D)  $50, $50.E)  $650, $450.

Gavin Ewers · Accepted Answer

Final Answer : C, Explanation :  In this pricing game, Gooi has the opportunity to choose a high or low price, and Tan has the opportunity to match or undercut that price.If Gooi chooses a high price, say $300, Tan will have the incentive to undercut that price by choosing $150, since this will result in higher profits for Tan ($250) than matching the high price ($0).If Gooi instead chooses a low price, say $150, Tan will have the incentive to match that price, since undercutting would result in lower profits for Tan ($100).Therefore, the only equilibrium in this game is for Gooi to choose a high price and for Tan to choose to undercut that price, resulting in payoffs of $400 for Tan and $150 for Gooi.

Refer to Scenario 13.16. If Gooi moves first, the payoff in equilibrium will be:

A) $150, $0.
B) $150, $300.
C) $400, $150.
D) $50, $50.
E) $650, $450.

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