Ford's Chevrolet's Ford’s Chevrolet’s
Selling Selling Profits Profits
Price Price (millions) (millions)
$ 4,000 $ 4,000 $ 8 $ 8
4,000 8,000 12 6
4,000 12,000 14 2
8,000 4,000 6 12
8,000 8,000 10 10
8,000 12,000 12 6
12,000 4,000 2 14
12,000 8,000 6 12
12,000 12,000 7 7
- What price will Ford charge?
- What price will Chevrolet charge once Ford has set its price?
- What is Ford’s profit after Chevrolet’s response?
- If the two firms collaborated to maximize joint profits, what prices would they set?
- Given your answer to part (d), how could undetected cheating on price cause the cheating firm’s profit to rise?
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