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Question 2 [5 points] Given the payoff matrix below, answer the following questions: Company D High Prices Low Prices A B Company C $120,000 Company
Question 2 [5 points] Given the payoff matrix below, answer the following questions: Company D High Prices Low Prices A B Company C $120,000 Company C $50,000 High Prices Company D $120,000 Company D $160,000 Company C C D Low Prices Company C $160,000 Company C $190,000 Company D $50,000 Company D $190,000 a) Using the payoff matrix, what is the appropriate description of the mutual interdependence that characterizes oligopolistic industries? None of the descriptions are appropriate in this situation. O The firms C and D are dependent because their profits depend not just on their own price, but also on the other firm's price. O The firms C and D are interdependent because their profits depend not just on their own price, but also on the other firm's price. The firms C and D are interdependent because their profits depend only on their own price. b) Assuming no collusion between Company C and Company D, what is the likely profit outcome of Company C? Profit outcome = $0 c) Assuming no collusion between Company C and Company D, what is the likely profit outcome of Company D? Profit outcome = $0
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