Suppose Two Firms,Allstom from France,and Bombardier from Canada,are Bidding on a Contract

question 122

Multiple Choice

Suppose two firms,Allstom from France,and Bombardier from Canada,are bidding on a contract to replace train cars for the subway system in Mexico City.If they bid the same amount,they share the contract-otherwise,the low bid wins.The figure below shows the payoff matrix for this contest. FIGURE 11-5
-Refer to Figure 11-5.If Allstom and Bombardier co-operated with each other when bidding on the contract,then the likely outcome is that

• A)each firm bids $35 million,and earns profit of $2.5 million.
• B)each firm bids $50 million,and earns profit of $10 million.
• C)Bombardier bids $50 million,and earns profit of $0,while Allstom bids $35 million and earns profit of $5 million.
• D)Bombardier bids $35 million,and earns profit of $5 million,while Allstom bids $50 million and earns profit of $0.

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