There are two firms in a market that produce an identical product. Each firm has either one or zero units to sell. The probability of having a unit to sell is q and the probability of having no units to sell is 1-q. There is a single consumer interested in buying only one unit of the good at a price not to exceed $1. If both firms have capacity available, it will buy from the lowest priced. If only one firm has capacity, it buys from that firm provided its price does not exceed $1.
Each student in the game represents one of these firms. You must decide what price to charge for the good if you were to have a unit available to sell. Note that at the time of making this decision you do not know whether your competitor will have a unit of capacity to sell or not and what price it will choose.
Each group must submit three prices, corresponding to the optimal price choices for the following three cases:
1. q=1/4
2. q=1/2
3. q=3/4
I will use your inputed strategy pairwise against each of the strategies submitted by others in the class. Your score will be the total profits made.
Input your price (between 0 and 1) for each of the following cases:
Price for q=1/4:
Price for q=1/2:
price for q=3/4: