Exhibit 10-7 Two-Firm Payoff Matrix

Suppose costs are identical for the two firms in Exhibit 10-7. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:
A) Camel charging the high price and Marlboro charging the high price.
B) Camel charging the low price and Marlboro charging the low price.
C) Camel charging the low price and Marlboro charging the high price.
D) Camel charging the high price and Marlboro charging the low price.

Question

Exhibit 10-7 Two-Firm Payoff Matrix

Suppose costs are identical for the two firms in Exhibit 10-7. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:
A) Camel charging the high price and Marlboro charging the high price. 
B) Camel charging the low price and Marlboro charging the low price. 
C) Camel charging the low price and Marlboro charging the high price. 
D) Camel charging the high price and Marlboro charging the low price.

Quizplus · Accepted Answer

The Answer of Exhibit 10-7 Two-Firm Payoff Matrix

Suppose costs are identical for the two firms in Exhibit 10-7. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:
A) Camel charging the high price and Marlboro charging the high price. 
B) Camel charging the low price and Marlboro charging the low price. 
C) Camel charging the low price and Marlboro charging the high price. 
D) Camel charging the high price and Marlboro charging the low price.