Two firms producing the same product agree to collude by restricting their total production to drive up the market price for their product and make profits of $18 million each. But if one of the firms restricts output (thereby keeping the agreement) while the other cheats and produces more, the latter makes $20 million while the former makes only $13 million. If they both cheat on their agreement, they end up making $15 million in profits each. The payoff matrix of this game is shown below (payoffs are displayed in millions of dollars): In this game, a dominant strategy equilibrium is: Group of answer choices (Cheat, Cheat) (Collude, Collude) (Collude, Cheat) (Cheat, Collude) No answer text provided. C C Firm 2 Collude Cheat Collude 18, 18 13, 20 Firm 1 Cheat 20, 13 15, 15
Two firms producing the same product agree to collude by restricting their total production to drive up the market price for their product and make profits of $18 million each. But if one of the firms restricts output (thereby keeping the agreement) while the other cheats and produces more, the latter makes $20 million while the former makes only $13 million. If they both cheat on their agreement, they end up making $15 million in profits each. The payoff matrix of this game is shown below (payoffs are displayed in millions of dollars): In this game, a dominant strategy equilibrium is: Group of answer choices (Cheat, Cheat) (Collude, Collude) (Collude, Cheat) (Cheat, Collude) No answer text provided. C C Firm 2 Collude Cheat Collude 18, 18 13, 20 Firm 1 Cheat 20, 13 15, 15
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Two firms producing the same product agree to collude by restricting their total production to drive up the market price
for their product and make profits of $18 million each. But if one of the firms restricts output (thereby keeping the
agreement) while the other cheats and produces more, the latter makes $20 million while the former makes only $13
million. If they both cheat on their agreement, they end up making $15 million in profits each. The payoff matrix of this
game is shown below (payoffs are displayed in millions of dollars): In this game, a dominant strategy equilibrium is:
Group of answer choices (Cheat, Cheat) (Collude, Collude) (Collude, Cheat) (Cheat, Collude) No answer text provided.
C
C
Firm 2
Collude
Cheat
Collude
18, 18
13, 20
Firm 1
Cheat
20, 13
15, 15
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