(Figure: Nike and Reebok Sales) Use Figure: Nike and Reebok Sales. Reebok and Nike must decide whether to have a sale or not, based on the potential economic profits shown in the table. If Nike and Reebok were to collude to maximize profits, and both decided to cheat on the collusive agreement, what strategy should each follow?

Question

(Figure: Nike and Reebok Sales) Use Figure: Nike and Reebok Sales. Reebok and Nike must decide whether to have a sale or not, based on the potential economic profits shown in the table. If Nike and Reebok were to collude to maximize profits, and both decided to cheat on the collusive agreement, what strategy should each follow?
​

Quizplus · Accepted Answer

If both Nike and Reebok cheat on the collusive agreement, each firm will try to maximize their own profits by having a sale. In this case, the best strategy for both firms is to have a sale, as it results in higher economic profits for both companies (Nike: $100 million, Reebok: $60 million) compared to the scenario where neither firm has a sale (Nike: $70 million, Reebok: $40 million). Therefore, the best choice is option D.