Question: Consider the following payoff matrix in which the numbers indicate the profit in millions of dollars for a duopoly based either on a high-price or

Consider the following payoff matrix in which the numbers indicate the profit in millions of dollars for a duopoly based either on a high-price or a low-price strategy Firm A High-price Low-price High-priceA500 B $500 B $300 Firm B Low-price A S300 Low-priceB $650 B $400 a) What will be the result when each firm chooses a high-price strategy? 4 marks] b) What will be the result when Firm A chooses a low-price strategy while Firm B maintains a high-price strategy? 4 marks] c) What will be the result when Firm B chooses a low-price strategy while Firm A maintains a high-price strategy? 4 marks] 4 marks] 4 marks] d) What will be the result when each firm chooses a low-price strategy? e) What two conclusions can you draw about collusion? TOTAL: 20 MARKS

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