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Consider the following payoff matrix for a game in which two firms attempt to collude: Firm B cuts Firm B colludes Firm A Cuts 8,6
Consider the following payoff matrix for a game in which two firms attempt to collude:
Firm B cuts
Firm B colludes
Firm A Cuts
8,6
20,0
Firm A Colludes
10,24
12,12
Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut).The payoffs are stated in terms of millions of dollars of profits earned per year.What is the Nash equilibrium for this game?
A.B cuts and A colludes.
B.Both firms cut prices.
C.A cuts and B colludes.
D.Both firms collude.
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