Problem:
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 a payoff matrix which can be found in the attachment:
1) Which strategy offers both Westinghouse and General Electric the best financial outcome?
2) Does either firm have a dominant strategy? If yes, which firm and what strategy?
3) 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 _____________.
4) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?