Refer to the normal-form game of price competition in the payoff matrix below. $\begin{array}{c}
\text { Firm B }\
\text { Firm A}
\begin{array}{|l|l|l|}
\hline & \text { Low Price } & \text { High Price } \
\hline & & \
\text { Low Price } & 0,0 & 50,-10 \
\hline & & \
\text { High Price } & -10,50 & 20,20\
\hline
\end{array}\end{array}$ Suppose that firm A deviates from a trigger strategy to support a high price.What is the present value of A's payoff from cheating?
A) 70
B) 50
C) 30
D) 20

Question

Refer to the normal-form game of price competition in the payoff matrix below. $\begin{array}{c}
\text { Firm B }\
\text { Firm A}
\begin{array}{|l|l|l|} 
\hline & \text { Low Price } & \text { High Price } \
\hline & & \
\text { Low Price } & 0,0 & 50,-10 \
\hline & & \
\text { High Price } & -10,50 & 20,20\
\hline
\end{array}\end{array}$ Suppose that firm A deviates from a trigger strategy to support a high price.What is the present value of A's payoff from cheating?
A) 70
B) 50
C) 30
D) 20

Quizplus · Accepted Answer

Cheating by firm A means it sets a low price while firm B sets a high price, resulting in a payoff of 50 for firm A.

Refer to the Normal-Form Game of Price Competition in the Payoff