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Can anyone explain how the firms will play this game? Below is matrix of likely payoffs for two firms, both of whom are considering two
Can anyone explain how the firms will play this game?
Below is matrix of likely payoffs for two firms, both of whom are considering two alternative pricing strategies: Maintaining price or reducing it. What is the most likely outcome? Strategies for Firm B Maintain price Strategies r Firm A Lower Price Maintain Price A's profit -SISO B's profil A 's profit - S250 B's rofit - - sso Lower Price A's profit - - sss B's profil S250 A's profit SIS B's fit=-S20 O If the firms act independently, they will both elect to maintain prices. If the firms act independently, they will elect to lower prices. Regardless of whether the firms act independently or collusively, low price strategies will be pursued. If the firms act collusively, they will elect to lower prices. Regardless of whether the firms act independently or collusively, strategies of price will be pursued.
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