The following provides information for a one-shot game.

Firm B

Low Price

High Price

Low Price

(2, 2)

(10,

8)

Firm A

High Price

(8,

10)

(15, 15)

The first number in brackets is Firm A's return, and the second number in brackets is Firm B's

return.

Firm A and Firm B operate in a duopoly in which you and a rival must simultaneously decide

what price to advertise in the weekly newspaper.

(a) Does Firm A have a dominant strategy? If yes, what is that dominant strategy?

(b) Does Firm B have a dominant strategy? If yes, what is that dominant strategy?

(c) Is there a Nash equilibrium (or Nash equilibriums) for the above game? If yes, what is that

Nash equilibrium?

(d) What will the collusive outcome be for the above game?

(e) If a collusive outcome is reached, will either firm have an incentive to cheat on the

agreement? Please explain.