Exhibit 9-5  Two-Firm Payoff Matrix Suppose Costs Are Identical for the Two

question 92

Multiple Choice

Exhibit 9-5  Two-Firm Payoff Matrix Suppose costs are identical for the two firms in Exhibit 9-5. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:

• A) Widget Co. charging the high price and Ajax Co. charging the low price.
• B) Widget Co. charging the high price and Ajax Co. charging the high price.
• C) Widget Co. charging the low price and Ajax Co. charging the low price.
• D) Widget Co. charging the low price and Ajax Co. charging the high price.

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Definitions:

Diversity

The inclusion of different types of people (such as different races or cultures) in a group or organization, valuing heterogeneity in various dimensions.

Repressive Law

A form of legal and social control characterized by the restriction of freedoms and the use of punishment to maintain order and enforce compliance.

Mechanical Solidarity

Mechanical solidarity is a concept in sociology that describes the integration of members of a society who have common values and beliefs, which creates a sense of social cohesion.

Organic Solidarity

Organic solidarity is a social cohesion based on the interdependence of individuals in more advanced societies, as described by Émile Durkheim.