The Payoff Table Below Depicts Price Competition Between Two Electronics

Essay

The payoff table below depicts price competition between two electronics stores. (Payoffs are weekly profits in thousands of dollars for each store.)
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text { Circuit City's Prices }\\\begin{array} { | c | c | c | c | } \hline \text { Best Buy's Prices } & \text { High } & \text { Medium } & \text { Low } \\\hline \text { High } & 100,100 & 75,120 & 70,90 \\\hline \text { Medium } & 120,65 & 80,80 & 65,110 \\\hline \text { Low } & 110,50 & 85,75 & 60,60 \\\hline\end{array}\end{array}$ (a) The stores determine their strategies independently of one another. What are the stores' respective equilibrium strategies? Explain briefly.
(b) Suppose that each store adopts a price matching strategy such that each pledges to instantly match any lower price by its rival. What will be the effect on the stores’ chosen prices? Will consumers benefit from such policies? Explain riefly.