1. Consider the following payoff matrix in which the numbers indicate the profit in millions of dollars for a duopoly based either on a high-pric or a low-price strategy. Firm A High-price Low-price A = $650 B = $300 A = $500 High-price B = $500 Firm B A = $300 B = $650 A = $400 B = $400 Low-price (a) What will be the result when each firm chooses a high-price strategy? (b) What will be the result when Firm A chooses a low-price strategy while Firm B maintains a high-price strategy? (c) What will be the result when Firm B chooses a low-price strategy while Firm A maintains a high-price strategy? (d) What will be the result when each firm chooses a low-price strategy? (e) What two conclusions can you draw about collusion?
1. Consider the following payoff matrix in which the numbers indicate the profit in millions of dollars for a duopoly based either on a high-pric or a low-price strategy. Firm A High-price Low-price A = $650 B = $300 A = $500 High-price B = $500 Firm B A = $300 B = $650 A = $400 B = $400 Low-price (a) What will be the result when each firm chooses a high-price strategy? (b) What will be the result when Firm A chooses a low-price strategy while Firm B maintains a high-price strategy? (c) What will be the result when Firm B chooses a low-price strategy while Firm A maintains a high-price strategy? (d) What will be the result when each firm chooses a low-price strategy? (e) What two conclusions can you draw about collusion?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 3E
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