Suppose Two Firms in a Duopoly Implicitly Collude and Charge

question 144

Multiple Choice

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

• A)The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact.
• B)The advertisement ensures that the other firm does not cheat.If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same.
• C)The offer to match prices is a way of signalling to antitrust authorities that the firms are not engaged in illegal collusion.
• D)The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available.

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Definitions:

Grammatical Errors

Mistakes in the use of language rules that can affect the clarity and professionalism of written communication.

Report

A detailed account or statement describing the findings of some investigation or analysis.

Visual Parallelism

The use of similar visual elements within a design or composition to create a sense of balance and harmony.

Consistency

The quality of maintaining the same standards, behaviors, or views over time, often considered key in branding and messaging.