Question: Use the payoff matrix below for the following exercise. The payoff matrix indicates the profit outcome that corresponds to each firm's pricing strategy. A) Firms

Use the payoff matrix below for the following exercise. The payoff matrix indicates the profit outcome that corresponds to each firm's pricing strategy.

A) Firms A and B are members of an oligopoly. Explain the interdependence that exists in the oligopoly using the payoff matrix facing the two firms.
B) Assuming that the firms cooperate, what is the solution to the problem facing the firms?
C) Given your answer to part b, explain why cooperation would be mutually beneficial and then explain why one of the firms might cheat" (Boyes & Melvin, 2013, p. 566).

Firm A's Price $20 Firm A earns $35 profit Firm B earns $39 profit Firm A earns $38 profit Firm B earns $35 profit $15 Firm A earns $40 profit Firm B earns $37 $20 profit Firm A earns $49 profit Firm B earns $30 $15 profit Firm B's Price

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