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In the following strategic game, the two firms, Caro Inc and Barato Corp can either set the price of their product high or discount. In
In the following strategic game, the two firms, Caro Inc and Barato Corp can either set the price of their product high or discount. In this market, customers are very price sensitive: when one firm sets a discount price it steals the majority of customers from its competitor. The game is represented in the table below. Caro Inc High Price Discount Price Barato Corp High Price Barato gets $500 Caro gets $500 Barato get $300 Caro gets $600 Discount Price Barato gets $600 Caro gets $300 Barato gets $400 Caro gets $400 The highest payoff for each firm would be reached if a. Barato sets a discount price and Caro sets a high price b. Barato sets a high price and Caro sets a discount price c. the two firms could successfully collude d. each firm plays their dominant strategy
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