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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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