Figure: Pricing Strategy in Cable TV Market I (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise, then without any collusion:

Question

Figure: Pricing Strategy in Cable TV Market I   (Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I.If both CableNorth and CableSouth advertise, then without any collusion:

Quizplus · Accepted Answer

If both CableNorth and CableSouth advertise, neither firm will have an incentive to stop advertising. A price war would lower the profits of both firms, so they will continue to advertise and charge high prices to maintain their profits. This is depicted by the stable equilibrium point in the middle of the graph.