If Boring were able to move first in a sequential version of the game in Scenario 13.15, the equilibrium would be:

A) an $80 price for Simple and a $70 price for Boring.
B) an $80 price for Simple and a $25 price for Boring.
C) a $35 price for Simple and a $70 price for Boring.
D) a $35 price for Simple and a $25 price for Boring.
E) a mixed strategy equilibrium.

Question

Margo-Grace Dippner · Accepted Answer

Final Answer : B, Explanation :  In a sequential game where Boring moves first, it would set a price anticipating Simple's response. By setting a price of $25, Boring ensures that Simple's best response is to set a price of $80, as Simple would want to avoid a price war that would lead to lower profits for both. This strategic move by Boring secures it a portion of the market by undercutting Simple's higher price point, leading to an equilibrium of an $80 price for Simple and a $25 price for Boring.

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