Table 14-8

Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, 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 Brawny Juice selects a high price, what is Power Fuel's best strategy and what will Power Fuel earn as a result of this strategy?

Question

Table 14-8
  
Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, 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 Brawny Juice selects a high price, what is Power Fuel's best strategy and what will Power Fuel earn as a result of this strategy?

Quizplus · Accepted Answer

If Brawny Juice selects a high price, Power Fuel's best strategy is to select a low price, which will result in Power Fuel earning $16 million. This is because if Power Fuel selects a high price as well, both firms will earn only $9 million each, which is lower than the $16 million that Power Fuel can earn by selecting a low price. Therefore, B is the correct choice.

Table 14-8 Two Rival Oligopolists in the Athletic Supplements Industry, the Power