6. Given the pay-off matrix that shows the annual profits for alternative pricing decisions faced by two firms in a duopoly (assume they have similar production costs: Firm 2 Firm 1 Charge low price Charge high price Charge low price 1: P15 M, 2: P15 M 1: P10 M, 2: P30 M Charge high price 1: P30 M, 2: P10 M 1:P25 M, 2: P25 M a. What is the dominant (best) pricing decision of Firm 1 and why? b. What is the dominant (best) pricing decision of Firm 2 and why? C. If the two firms decide to cooperate and agree on pricing, which pricing decision will they both follow? How c ich firm make sure that the other firm will follow their pricing P
6. Given the pay-off matrix that shows the annual profits for alternative pricing decisions faced by two firms in a duopoly (assume they have similar production costs: Firm 2 Firm 1 Charge low price Charge high price Charge low price 1: P15 M, 2: P15 M 1: P10 M, 2: P30 M Charge high price 1: P30 M, 2: P10 M 1:P25 M, 2: P25 M a. What is the dominant (best) pricing decision of Firm 1 and why? b. What is the dominant (best) pricing decision of Firm 2 and why? C. If the two firms decide to cooperate and agree on pricing, which pricing decision will they both follow? How c ich firm make sure that the other firm will follow their pricing P
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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d. If all firms in an oligopolistic market have similar
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