(Table) Assume That Firm a and Firm B Are Oligopolies

question 184

Multiple Choice

(Table) Assume that firm A and firm B are oligopolies and both charge $20 for a product and face roughly the same costs. Firm A is considering a price decrease to $15. Profits for each firm are given in the payoff matrix (A's profits listed first, B's profits listed second) shown in the table. How will firm B react?
$\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad {\text { Firm B's Price }} \\\begin{array}{rrrr} & &\$ 20 & \$ 15 \\\text { Firm A's Price } & \$ 20 &\$ 100,000 & \$ 60,000 \\\\& &\$ 100,000 & \$ 120,000 \\& \$15 &\$ 120,000 & \$ 80,000 \\& &\$ 60,000 & \$ 80,000\end{array}\end{array}$

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