Synergy Co. and Durham Co. are the only two firms in the TVs market.The 2 firms can collude and both charge higher prices.The table below shows the profits per unit they can hope to earn based on pricing strategies.However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gaincomplete market share and earn $1470 profit per unit.However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit -lower than what they could earn if they both charged a high price (i.e., $1100).Synergy Co. High priceLow priceDurham Co.High price$1100, $1100$1470, $0Low price$0, $1470$700, $700What would be the strategy that would maximize profit for both firms?○Both firms collude and charge a high priceOFirms compete: One firm charges a high price while the other charges a low priceOBoth firms collude and charge a low priceONone of these What is the dominant strategy in this game, most likely to take place?OBoth firms charge a high priceOne firm charges a high price while the other charges a low priceOBoth firms charge a low priceONone of theseCollusion is difficult to achieve and maintain becauseOBoth firms have an incentive to cheat and lower their priceOFirms do not wish to alienate their customers○Both firms can achieve higher profit if they competeONone of these

There are two firms in the above Game - Synergy Co. & Durham Co. Strategy Set of Firm 1 =…

Synergy Co. and Durham Co. are the only two firms in the TVs market. The 2 firms can collude and both charge higher prices. The table below shows the profits per unit they can hope to earn based on pricing strategies. However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gain complete market share and earn $1470 profit per unit. However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit - lower than what they could earn if they both charged a high price (i.e., $1100). Durham Co. High price Synergy Co. High price $1100, $1100 Low price $1470 $0 Low price $0, $1470 $700 $700

Synergy Co. and Durham Co. are the only two firms in the TVs market. The 2 firms can collude and both charge higher prices. The table below shows the profits per unit they can hope to earn based on pricing strategies. However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gain complete market share and earn $1470 profit per unit. However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit - lower than what they could earn if they both charged a high price (i.e., $1100). Durham Co. High price Synergy Co. High price $1100, $1100 Low price $1470 $0 Low price $0, $1470 $700 $700

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 19SQ

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