Question: QUESTION 4 (CLO3) Consider the following payoff matrix in which the numbers indicate the profit in millions of dollars for a duopoly based either on

QUESTION 4 (CLO3) 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 for Firm A and Firm B. Firm A High-price Low-price A = $150 A = $200 High-price B = $150 B = $90 Firm B A = $90 A = $100 Low-price B = $200 B = $100 a. Explain the term "game theory". (3) b. What will be the result when each firm chooses a high-price strategy? (1.5) C. What will be the result when Firm A chooses a low-price strategy while Firm B maintains a high-price strategy? (1.5) d. What will be the result when Firm B chooses a low-price strategy while Firm A maintains a high-price strategy? (1.5) e. What will be the result when each firm chooses a low-price strategy? (1.5) f. What are the two conclusions can you draw if the two firms collude? Discuss. (6)

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