Suppose that prices are set only once but each newspaper has complete flexibility as to what price to charge (rounded off to the nearest penny). What price do you expect the Post to charge? And what price should the Daily News charge? Explain.

Since round numbers?especially $2.00 and $2.50?are clearly "focal points" for tabloid pricing, let's return to the choice of just those two price points. And for purposes of simplification, let's assume that the two newspapers have payoffs as given by the matrix below: