Al and Bill operate the only two barber shops in a small town. They might try to form a cartel to charge a high price for hair cuts. The payoffs represent their daily from charging high and low prices. Al's Barber Shop High price Low price Bill's Barber Shop High price A $125 $200 C. Low price BA $125 $50 $50 $75 b. d. B $200 $75

Al and Bill operate the only two barber shops in a small town. They might try to form a cartel to charge a high price for hair cuts. The payoffs represent their daily from charging high and low prices. Al's Barber Shop High price Low price Bill's Barber Shop High price A $125 $200 C. Low price BA $125 $50 $50 $75 b. d. B $200 $75

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Al and Bill operate the only two barber shops in a small town. They might try to form
a cartel to charge a high price for hair cuts. The payoffs represent their daily from
charging high and low prices.
Al's Barber Shop
a.
b.
C.
High price
Low price
d.
Bill's Barber Shop
High price
A
$125
$200
Which cell represents a Nash equilibrium?
a.
C.
Low price
BA
$125 $50
$50 $75
b.
d.
B
$200
$75

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