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

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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 360-- Assume for simplicity that each firm operates with zero total cost. Suppose that two firms collude. How much more profit each firm can obtain relative to Cournot competition? 8000 14400 7200 16000
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