2. List 3 ways Monopoly is similar to Monopolistic Competition.














Before you start this, you must have read pages 155-161. It would be helpful to have watched these two short videos. Watching these is also a good way to prepare for class activity on Wed Dec. 3.








3. X Station and PlayBox are in the same market. Without colluding, each must decide to price their game console HIGH or LOW. Using the payoff matrix below, decide on the pricing strategy each firm should pursue. The profits of X Station are in black and the profits of PlayBox are in red.





(X Station and Play Box profits ) Play Box


high low


high 400 / 500 50 / 300

X Station



low 600 / 150 100 / 200





a. Does X Station have a dominant strategy? __________________


If yes, what???______________


b. Does PlayBox have a dominant strategy? ___________________


If yes, what??________________


c. Is there a Nash equilibrium? __________________




If yes, what?? __________________


d. If X Station and PlayBox were to collude, what would the pricing strategy be?