Bert and Ernie Are Noncolluding Oligopolists

question 5

Multiple Choice

Bert and Ernie are noncolluding oligopolists.If both choose a high price strategy,each makes $40 in profits; if both choose a low price strategy,each makes $30 in profits.If Bert chooses a high price strategy and Ernie chooses a low price strategy,Bert makes $20 in profits and Ernie makes $60 in profits,while if Bert chooses a low price strategy and Ernie chooses a high price strategy,Bert makes $60 in profits and Ernie makes $20 in profits.Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

• A) Both choose a high price strategy.
• B) Both choose a low price strategy.
• C) Bert chooses a high price strategy and Ernie chooses a low price strategy.
• D) Bert chooses a low price strategy and Ernie chooses a high price strategy.

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Definitions:

Staircase Analysis

A method used to break down and examine the incremental progress or development in a series of stages or steps.

Sales Forecasts

Projections of the amount of a product or service that will be sold in a future period, based on historical data, market trends, and other factors.

Marketing Mix

The combination of different marketing elements used by a business to meet its targets within a given market, emphasizing the importance of adjusting these elements to achieve marketing objectives.

Effective Sales

The achievement of sales goals in an efficient manner with a focus on maximizing customer satisfaction and profitability.