The market for bagels contains two firms: BagelWorld (BW) and Bagels'R'Us (BRU) .The owners of the two firms decide to fix the price of bagels.The table shows the total profits the firms will earn if they abide by the price setting agreement or if they cheat on the agreement.
Refer to the figure above.Suppose the firms agree to the following: if one firm cheats today,the other firm will cheat tomorrow,but if one firm abides today,the other will abide tomorrow.The likely effect of this agreement would be:
A) to increase the probability that both firms would cheat.
B) to increase the probability that Bagel World would cheat.
C) to increase the probability that both firms would abide.
D) to increase the probability that Bagels 'R' Us would cheat.
Correct Answer:
Verified
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