Wide Awake ("W")"W" earns"W" earns$3 million$4 millionHigh "Z"' earns"Z"' earnsprice$3 million$1 millionZuma ("Z")"W" earns"W" earns$1 million$2 millionLowprice"Z" earns"Z" earns$4 million$2 millionTwo rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each canchoose either a high price or a low price. The table below shows the payoff matrix with the profit that each firm canexpect to earn depending on the pricing strategy it adopts9.Refer to the payoff matrix above.A. Assuming the firms do not coordinate their actions, what is the outcome of this game?B. If the firms decide to collude, what prices will they select? Why?10. Refer to the payoff matrix above.A. If the two firms collude, is there an incentive for either to cheat on the collusion agreement? Explain.B. In general, why do firms tend not to engage in price war?High priceLow price

In the oligopoly market, the firms have massively interdependent. Action of one firm decides the…

"Z" earns price "Z" earns $3 million $1 million ("Z") "W" earns "W" earns $1 million $2 million Low "Z" earns price "Z" earns $4 million $2 million val oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can either a high price or a low price. The table below shows the payoff matrix with the profit that each firm can to earn depending on the pricing strategy it adopts

"Z" earns price "Z" earns $3 million $1 million ("Z") "W" earns "W" earns $1 million $2 million Low "Z" earns price "Z" earns $4 million $2 million val oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can either a high price or a low price. The table below shows the payoff matrix with the profit that each firm can to earn depending on the pricing strategy it adopts

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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