Answer to Question #150135 in Economics of Enterprise for Rakshya

Question

suppose apple and samsung who do not communicate are engaged in a small phone sales games and each firms seek yk maximize profit.the first set high price to low price.if both price each makes $100 profit per phone.if one sets a low price an the other a high price,the high price firms makes $500 profit per phone and the low price firms makes $50.if both set low price,then each makes $200 profit phone.what would be the equilibrium outcome of the game?would the equilibrium outcome be better off or worse off to both apple and samsung? explain why

Answer 1

Solution to question number #150135

Both high price, they get $100 profit each.

One high price and one low, high price gets $500 and low price $50

Both low price, they get $200 each.

Equilibrium profit for apple and samsung is achieved if both prices their phones highly or lowly. Since this is competition, one will set a high price and the other one low, which will gradually increase to be in same position as the first one. the end result will be an equilibrium profit of $100

Equilibrium of $100. The equilibrium will enhance equality in the market profits gained but will disadvantage either apple or samsung because cost of production may not be the same.