Let two oil firms, A and B, in a duopoly be choosing their production decisions. For simplicity, assume they can choose two production levels: HI and LO. If both firms chooose LO, they each earn $3 billion. If both firms choose HI, they each earn $2 billion. If one firm chooses HI while the other chooses low, the HI firm earns $4 billion and the LO firm earns $1 billion. What is the strategy that optimizes the payoffs to both firms if they collude?

		A chooses LO, B chooses LO
		A chooses HI, B chooses LO
		A chooses LO, B chooses HI
		A chooses HI, B chooses HI

Answer rating: 100% (QA)

Payoff Matrix of the above game could be written as FIRM B LO HO FIRM A LO 3 billion 3 billion 1 b... View the full answer