Use the table below to answer the following question.
Table 14.2.3
-Refer to Table 14.2.3.Store X and Store Y must decide whether or not to lower their prices.The table gives the economic profit made by Store X and Store Y.Which one of the following observations is correct?
A)Both Store X and Store Y have a dominant strategy of raising their prices.
B)If Store X lowers its prices and Store Y does not,Store X will earn a $20 profit.
C)If Store Y lowers its prices,Store X will be better off not lowering its prices.
D)Both Store X and Store Y would be better off if they could collude and agree to not lower prices.
E)Both Store X and Store Y have a dominant strategy of lowering their prices.

Question

Use the table below to answer the following question.
Table 14.2.3 
-Refer to Table 14.2.3.Store X and Store Y must decide whether or not to lower their prices.The table gives the economic profit made by Store X and Store Y.Which one of the following observations is correct?
A)Both Store X and Store Y have a dominant strategy of raising their prices. 
B)If Store X lowers its prices and Store Y does not,Store X will earn a $20 profit. 
C)If Store Y lowers its prices,Store X will be better off not lowering its prices. 
D)Both Store X and Store Y would be better off if they could collude and agree to not lower prices. 
E)Both Store X and Store Y have a dominant strategy of lowering their prices.

Quizplus · Accepted Answer

D is correct because collusion to keep prices high would likely result in higher profits for both stores compared to a scenario where they engage in a price war, which typically reduces profits for both parties involved.

Use the Table Below to Answer the Following Question