Using the information in Question 4 and Figure 4 above, complete the following table to depict the two-period pricing situation when Dr. Fine always plays "tit-for-tat" and Dr. Feelgood always plays "tit-for-tat."
Using the information in Question 4 and Figure 4 above, complete the following table to depict the two-period pricing situation when Dr. Fine always plays "tit-for-tat" and Dr. Feelgood always plays "tit-for-tat."
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question

Transcribed Image Text:4. In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due to
the structure of oligopoly markets, charging the low price is considered cheating, when
there is more than one pricing-period expected, because competitors are likely to be shut
out of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the only
two medical doctors offering immediate walk-in medical services in a small rural town.
Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a high
price or a low price for a standard medical visit. Figure 4 shows the possible profits for
Dr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.
Figure 4
D
r
F
i
e
Low
price
High
pnce
Dr Feelgood
Low price
$35 profit
$35 profit
$45 profit
$0 profit
High price
$0 profit
$45 profit
$38 profit
$38 profit
I

Transcribed Image Text:##
b. Using the information in Question 4 and Figure 4 above, complete the following table to
depict the two-period pricing situation when Dr. Fine always plays "tit-for-tat" and Dr.
Feelgood always plays "tit-for-tat.
Enter
response
here.
Enter
Feelgood response
here.
1
FIRST
Period
Charges
(high or low)
Fine
FIRST
Period
Payoffs
Enter
response
here.
Enter
response
here.
WE
SECOND
Period
Charges
(high or
low)
Enter
response
here.
Enter
response
here.
SECOND
Period
Payoffs
Enter
response
here.
Enter
response
here.
TOTAL
Payoffs
Enter
response
here.
Enter
response
here.
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