Refer to the figure below. If Row Resorts offers reduced rates, then Column Cruises would receive the highest payoff if it:
A)kept its rates high.
B)offered reduced its rates.
C)entered into a cartel with Row Resorts and agreed to jointly reduce rates.
D)chose either strategy because it will have the same payoff in either case.

Question

Refer to the figure below.  If Row Resorts offers reduced rates, then Column Cruises would receive the highest payoff if it:
A)kept its rates high. 
B)offered reduced its rates. 
C)entered into a cartel with Row Resorts and agreed to jointly reduce rates. 
D)chose either strategy because it will have the same payoff in either case.

Quizplus · Accepted Answer

According to the figure, if Row Resorts offers reduced rates, then Column Cruises would receive the highest payoff by also offering reduced rates (as indicated by the highlighted cell with a payoff of 6). This is because the payoff for Column Cruises is higher when both firms cooperate and reduce rates (6 for both) than when Column Cruises keeps its rates high and Row Resorts reduces its rates (4 for Column Cruises and 8 for Row Resorts). Therefore, the best choice for Column Cruises is to offer reduced rates.

Refer to the Figure Below