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Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.Suppose that,after one month,the cable providers follow a tit-for-tat strategy.Eventually,they will achieve a tacit collusive equilibrium at which:
A)both firms set a low price and each earns $90,000.
B)both firms set a high price and each earns $100,000.
C)CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000.
D)CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000.

Question

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.Suppose that,after one month,the cable providers follow a tit-for-tat strategy.Eventually,they will achieve a tacit collusive equilibrium at which:
A)both firms set a low price and each earns $90,000. 
B)both firms set a high price and each earns $100,000. 
C)CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000. 
D)CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000.

Quizplus · Accepted Answer

A tit-for-tat strategy in oligopolistic markets, like the cable TV market, often leads to a tacit collusive equilibrium where firms unofficially agree to avoid competitive price undercutting, resulting in both firms setting higher prices to maximize profits. This outcome aligns with choice B, where both firms set a high price and each earns $100,000, reflecting a stable and mutually beneficial equilibrium.

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