With price matching plus 10% of the difference the equilibrium will occur when:
A) both firms set the price at the high price.
B) firm A sets the price at the high price, and firm B sets the price at the low price.
C) firm A sets the price at the low price, and firm B sets the price at the low price.
D) both firms set the price at the low price.

Question

Quizplus · Accepted Answer

When both firms set the price at the high price, neither firm has an incentive to lower the price because the other firm will match it and add 10% of the difference, making it unprofitable to undercut.

With Price Matching Plus 10% of the Difference the Equilibrium