Consider 2 firms in a duopoly (Speedy and Hustle) that provide taxi transportation from the downtown area to the airport.

• If the 2 firms act independently (the do not engage in price fixing or any other collusive behavior), each firm will serve 100 passengers per day at a price of $20 per passenger and an average cost of $15 per passenger.
• Under a price fixing or cartel arrangement, each firm would serve 75 passengers per day at a price of $28 and an average cost of $18 per passenger.
• If one firm charges $20 and the other charges $28, the low price firm will earn a profit of $900 and the high price firm will earn a profit of $400.

Construct the payoff matrix. The practice of guaranteed price matching is (technically, anyway) illegal. Speedy chooses first. Predict the outcome. Does your answer change if Hustle chooses first?