-Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?
A) This situation is not a prisoners' dilemma.
B) If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit.
C) If Wal-Mart lowers its prices, Sears should keep its prices high.
D) Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.

Question

-Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?
A) This situation is not a prisoners' dilemma. 
B) If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit. 
C) If Wal-Mart lowers its prices, Sears should keep its prices high. 
D) Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.

Quizplus · Accepted Answer

Both companies would benefit more from keeping prices high, avoiding a price war that would reduce profits for both.

-Sears and Wal-Mart Must Decide Whether to Lower Their Prices