Table 14-8

Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.If Zuma selects a high price, what is Wide Awake's best strategy and what will Wide Awake earn as a result of this strategy?

Question

Table 14-8
  
Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.If Zuma selects a high price, what is Wide Awake's best strategy and what will Wide Awake earn as a result of this strategy?

Quizplus · Accepted Answer

If Zuma selects a high price, Wide Awake's best strategy is to select a low price. This will earn Wide Awake a profit of $4 million, which is higher than the profit it would earn if it also selected a high price ($3 million).

Table 14-8 Two Rival Oligopolists in the Coffee Industry, Wide Awake and Coffee