Use the following Payoff Matrix for Company A and Company B, the only two companies that produce
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Question:
- Use the following Payoff Matrix for Company A and Company B, the only two companies that produce widgets, to answer the following questions.
- What is the expected outcome of this one-time (not repeated) game? Defend your answer.
- How might your answer change if the game is repeated indefinitely?
- To what extent does this example illustrate why firms in some concentrated oligopolies exhibit cooperative or collusive behavior even though they don't explicitly collude?
Company B Lowers PriceCompany B Does Not Lower Price
Company A Lowers PriceCompany B's Payoff: $100
Company A's Payoff: $100Company B's Payoff: -$100
Company A's Payoff: $1,000Company A Does Not Lower PriceCompany B's Payoff: $1000
Company A's Payoff: -$100Company B's Payoff: $500
Company A's Payoff: $500
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