Table 11-7
Table 11-7 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Question

Table 11-7
  Table 11-7 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Quizplus · Accepted Answer

From the payoff matrix, both firms have the potential to earn a higher profit if they both agree to charge a higher price instead of continuing with the low price strategy. The best outcome for both firms would be if they both charge a high price and each earn a profit of $10,000. This can be achieved through implicit collusion, where both firms agree to charge the high price without explicitly communicating or coordinating with each other.

Table 11-7 Table 11-7 Shows the Payoff Matrix for Walmart