Two Firms Operating in the Same Market Must Choose Between

question 110

Multiple Choice

Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct?

• A) Firm A should charge the collude price, Firm B should charge a cheat price.
• B) Firm A should charge a cheat price, Firm B should charge a collude price.
• C) Both firms should charge a collude price.
• D) Both firms should charge a cheat price.