Q. 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 the following payoff matrix:

Westinghouse's price
High ($4000) Low ($2000)
General Electric's
price High ($4000)

Low ($2000)

Payoffs in dollars of profit.

a) Which strategy offers both Westinghouse and General Electric the best financial outcome?

b) Does either firm have a dominant strategy? If yes, which firm and Illustrate what strategy?

c) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?