Soapy Inc. and Suddies Inc., the only laundry detergent producers, collude and agree to share the market

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Soapy Inc. and Suddies Inc., the only laundry detergent producers, collude and agree to share the market equally. If neither firm cheats, each makes $1 million. If one firm cheats, it makes

$1.5 million, while the complier incurs a loss of $0.5 million. If both cheat, they break even.

Neither firm can monitor the other’s actions.

a. What are the strategies in this game?

Construct the payoff matrix for this game.

b. If the game is played only once, what is the equilibrium? Is it a dominant‑strategy equilibrium?

Explain.

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Economics

ISBN: 9781292433639

14th Global Edition

Authors: Michael Parkin

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Question Posted: Jan 27, 2024 10:03 PM

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Soapy Inc. and Suddies Inc., the only laundry detergent producers, collude and agree to share the market

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Economics

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