The payoff matrix to the right shows the prots two rms can make using alternative pricing strategies. What are the rms' pricing decisions? Does each High --- Firm 2'5 Price --- Low rm have a dominant strategy? Explain briey. '1: - A. The dominant strategy for each rm is to charge a low price because if one rm chooses either a high or low price, the other 5 rm WiJl always choose a low price to make more. " ' B. The dominant strategy for each rm is to collude and charge a _ high price so that each will make more. H ' - C. Neither rm has a dominant strategy because it is unlikely they could act together to charge higher prices and make more. Low -- Firm 1's Price -- Hio - D. The dominant strategy for each rm is to charge a high price because if one rm chooses either a high or low price, the other rm will always choose a high price to make more. Suppose conditions in the industry change in such a way that the amount that each rm makes if it charges a high price when the other rm charges a low price decreases from $2 million to $1 million. This is shown in the new payoff matrix to the right. Are the rms' pricing decisions altered by this change and, V L"_L_ 5:-.. n._ M\" I Suppose conditions in the industry change in such a way that the amount that High ___ Firm 2's Price ___ Low each rm makes if it charges a high price when the other rm charges a low price decreases from $2 million to $1 million. This is shown in the new payoff matrix to the right. Are the rms' pricing decisions altered by this change and, if so, in what way? Explain briey. lfthe amount that each rm makes if it charges a high price when the other rm charges a low price decreases from $2 million to $1 million, then ' ' A. Firm 1 will continue to charge a low price to make more, while "_' Firm 2 Will make more if it charges a higher price. ' ' B. Firm 2 will continue to charge a low price to make more, while Firm 1 Will make more if it charges a higher price. Low -- Firm 1's Price -- Hi- " ' C. both rms Wiil maintain their decisions to charge low prices because each can make more by doing so. ' ' D. both rms Wl maintain their decisions to charge high prices because each can make more by doing so. LII-.I III_- HIA n..:.... I n