Consider an oligopoly in which Firm A can choose between a low price and a high price, and FirmB has the same choices. If both firms choose a high price, they each make $20 million in profit. Iffirm B chooses high and firm A choose low, firm A earns $25 million and firm B earns $10 million.If firm A chooses high and firm B chooses low, firm A earns $14 million and firm B earms $23million. If they both choose a low price, they each earn $12 million.a. If the firms choose their prices independently and simultaneously, what will they eachchoose to do?b. If the firms could collude and choose simultaneously as a pair, what prices will theychoose?Is there another collusive option the firms might choose if this game was playedrepeatedly? Why or why not?C.

a. If both the firms A and B choose independently then they would choose high irrespective of other…

Consider an oligopoly in which Firm A can choose between a low price and a high price, and Firm B has the same choices. If both firms choose a high price, they each make $20 million in profit. If firm B chooses high and firm A choose low, firm A earns $25 million and firm B earns $10 million. If firm A chooses high and firm B chooses low, firm A earns $14 million and firm B earns $23 million. If they both choose a low price, they each earn $12 million. a. If the firms choose their prices independently and simultaneously, what will they each choose to do? b. If the firms could collude and choose simultaneously as a pair, what prices will they choose? Is there another collusive option the firms might choose if this game was played repeatedly? Why or why not? C.

Consider an oligopoly in which Firm A can choose between a low price and a high price, and Firm B has the same choices. If both firms choose a high price, they each make $20 million in profit. If firm B chooses high and firm A choose low, firm A earns $25 million and firm B earns $10 million. If firm A chooses high and firm B chooses low, firm A earns $14 million and firm B earns $23 million. If they both choose a low price, they each earn $12 million. a. If the firms choose their prices independently and simultaneously, what will they each choose to do? b. If the firms could collude and choose simultaneously as a pair, what prices will they choose? Is there another collusive option the firms might choose if this game was played repeatedly? Why or why not? C.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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