Predicting Price-Setting Strategies –

From the scenario for Katrina’s Candies, determine the importance of predicting the pricing strategies of rival firms in an industry characterized by mutual interdependence. Examine the common
price setting strategies of airiines that use game theory. Predict the potential effects of such pricing strategies on the demand for seats, and conclude the resulting impact on the profitability
of the airiines. • The Game Matrix below is for Katrina’s Candy and Gooey Goodness. The matrix shows the profits (or payoffs ) from each firm’s pricing strategy. Katrina’s payoffs are in black and
Gooey’s payoffs are in red.
What is Katrina’s Dominant Strategy? What is Gooey’s Dominant Strategy? What Cell (A, B, C, D) represents the solution? What would the consequence be for Katrina if they had not accurately
predicted their rival’s pricing strategy?
Katrina’s Matrix.png • Two airlines, American and United, must decide independently to follow a high volume (low price) strategy or a low volume (high price) strategy. The payoff matrix of each
combination of decisions is shown below. American’s profits are in the upper triangles and United’s are in the lower triangles.Does either firm have a dominant strategy? Explain.What will the
likely outcome be, cell A, B, C, or D?

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