Consider two separate and independent markets, Market A and Market B, each with two competing firms deciding on a high-price or low-price strategy. The payoff matrices below show the potential profits (in thousands of dollars) for the firms, with Firm 1's profit listed first in each pair.
Market A
| Firm 2: High Price | Firm 2: Low Price | |
|---|---|---|
| Firm 1: High Price | ($50, $50) | ($5, $80) |
| Firm 1: Low Price | ($80, $5) | ($20, $20) |
Market B
| Firm 2: High Price | Firm 2: Low Price | |
|---|---|---|
| Firm 1: High Price | ($40, $40) | ($30, $60) |
| Firm 1: Low Price | ($60, $30) | ($35, $35) |
Based on the potential outcomes, in which market does a firm face a greater risk by choosing the high-price strategy?
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Two competing firms, Firm A and Firm B, are deciding whether to set a high price or a low price for their products. The potential annual profits (in millions) for each firm are shown below based on their decisions:
- If both set a high price, they each earn $10M.
- If both set a low price, they each earn $4M.
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- If Firm A sets a low price and Firm B sets a high price, Firm A earns $15M and Firm B earns $1M.
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Consider two separate and independent markets, Market A and Market B, each with two competing firms deciding on a high-price or low-price strategy. The payoff matrices below show the potential profits (in thousands of dollars) for the firms, with Firm 1's profit listed first in each pair.
Market A
Firm 2: High Price Firm 2: Low Price Firm 1: High Price ($50, $50) ($5, $80) Firm 1: Low Price ($80, $5) ($20, $20) Market B
Firm 2: High Price Firm 2: Low Price Firm 1: High Price ($40, $40) ($30, $60) Firm 1: Low Price ($60, $30) ($35, $35) Based on the potential outcomes, in which market does a firm face a greater risk by choosing the high-price strategy?
Evaluating a Pricing Strategy Recommendation