Exhibit 9-6 Two-Firm Payoff Matrix Assume costs are identical for the two firms in Exhibit 9-6. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:

Question

Exhibit 9-6  Two-Firm Payoff Matrix  Assume costs are identical for the two firms in Exhibit 9-6. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:

Quizplus · Accepted Answer

If both firms were allowed to form a cartel and agree on their prices, they would maximize their joint profits by charging the monopoly price, which is the highest possible price that they can charge without inducing too many customers to switch to the competitor's product. Therefore, both firms would charge the high price, resulting in the highest joint profits.

Exhibit 9-6 Two-Firm Payoff Matrix Assume Costs Are Identical for the Two