Table 11-5 Table 11-5 Shows the Payoff Matrix for Wal-Mart

question 50

Multiple Choice

Table 11-5 Table 11-5 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-5.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

• A)Yes,the firms can implicitly collude and agree to charge a higher price.
• B)No,there is no incentive for each firm to consider any other strategy.
• C)No,any other strategy hurts consumers.
• D)Yes,each firm can implicitly agree to increase output and not to deviate from a low price.

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Definitions:

Functions

The roles or activities that are natural to or intended for an individual or thing.

Prevent

To stop something from happening or to hinder certain actions by taking proactive measures.

Stock

Shares representing ownership in a corporation, entitling the shareholder to a portion of the company’s profits and assets.

Testator

An individual who has made a will to dictate how their estate should be managed and distributed after their death.