Figure 12-4 -The Above Matrix (Figure 12-4) Displays the Possible Profit Results

question 74

Essay

Figure 12-4

-The above matrix (Figure 12-4) displays the possible profit results of two firms, A and B, from following two different possible strategies: charging a high price and charging a low price.In each cell, the first number is the profit of firm A, and the second number is the profit of firm B.
a.Assume that collusion is not possible.Determine the optimal strategy for each firm.Explain why it is the best strategy to follow.
a., explain why firms collude.What are the pitfalls of collusion?
b.Based on your answer to

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Definitions:

Hypothesis

A proposed explanation for a phenomenon, made as a starting point for further investigation, testing, or experimentation.

Informative

Providing useful or important information or details.

Assumptions

Statements or ideas accepted as true without proof, used as the basis for reasoning or argumentation.

Explanandum

The phenomenon or event that is to be explained, often used in the context of scientific inquiry.