Microeconomics

Two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. ABC's Decision High price Low price ABC's profit - $10 million ABC's profit = $14 million High price QRS's profit = $10 million ORS's profit = $4 million ORS's Decision ABC's profit = $4 million ABC's profit - $6.5 million Low price QRS's profit - $14 million ORS's profit - $6.5 million Refer to Figure 17-5. The dominant strategy for ABC is to charge a high price, and the dominant strategy for ORS is to charge a high price. charge a high price, and the dominant strategy for ORS is to charge a low price. charge a low price, and the dominant strategy for ORS is to charge a high price. charge a low price, and the dominant strategy for ORS is to charge a low price