Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell Blu-ray players, Movietonia and Videotech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its players. For example, the lower-left cell shows that if Movietonia prices low and Videotech prices high, Movietonia will earn a profit of $15 million and Videotech will earn a profit of $3 million. Assume this is a simultaneous game and that Movietonia and Videotech are both profit-maximizing firms. If the firms do not collude, what strategies will they end up choosing? True or False: The game between Movietonia and Videotech is an example of the prisoners' dilemma.

According to the payoff matrix in the question:

If Movietonia chooses to price high then Videotech will prefer to price low as 15>11 and if Movietonia chooses to price low even then Videotech will prefer to price low as 8>2.

Thus Videotech has a dominant strategy- of pricing low.

If Videotech prices high, then Movietonia prefers to price low as 15>:11 and if Videotech prices low even then .Movietonia prefers low pricing as 8>2.

Thus Movietonia has a dominant strategy of pricing low.

In case both do no collude. both will have pricing low as a dominant strategy. Both will and up choosing a low price.

The above situation is an example of prisoner's dilemma because if both of them cooperate and price high they end up earning higher payoffs than without cooperating.

this conflict is person vs. society

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