Refer to the above payoff matrix.Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy.Compared to the results from a high-price strategy for both firms,firm B will now:
A) lose $75 million in profit and firm A will gain $50 million in profit.
B) gain $50 million in profit and firm A will lose $50 million in profit.
C) gain $75 million in profit and firm A will lose $50 million in profit.
D) gain $50 million in profit and firm A will lose $75 million in profit. The high-price strategy results in $500 million profits for both.If B adopts a low-price strategy and A stays with the high-price strategy,B will gain and A will lose.

Question

Refer to the above payoff matrix.Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy.Compared to the results from a high-price strategy for both firms,firm B will now:
A) lose $75 million in profit and firm A will gain $50 million in profit. 
B) gain $50 million in profit and firm A will lose $50 million in profit. 
C) gain $75 million in profit and firm A will lose $50 million in profit. 
D) gain $50 million in profit and firm A will lose $75 million in profit. The high-price strategy results in $500 million profits for both.If B adopts a low-price strategy and A stays with the high-price strategy,B will gain and A will lose.

Quizplus · Accepted Answer

If firm B adopts a low-price strategy and firm A maintains a high-price strategy, firm B will gain $75 million in profit (from $425 million to $500 million) and firm A will lose $50 million in profit (from $500 million to $450 million). Thus, the best choice for firm B is to adopt a low-price strategy.

Refer to the Above Payoff Matrix