Answer the next question based on the following payoff matrix for a duopoly.The numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy Refer to the above payoff matrix.If both firms collude to maximize joint profits,the total profits for the two firms will be:
A) $800,000.
B) $1,200,000.
C) $1,250,000.
D) $1,400,000.

Question

Answer the next question based on the following payoff matrix for a duopoly.The numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy  Refer to the above payoff matrix.If both firms collude to maximize joint profits,the total profits for the two firms will be:
A) $800,000. 
B) $1,200,000. 
C) $1,250,000. 
D) $1,400,000.

Quizplus · Accepted Answer

To maximize joint profits, both firms need to collude and choose the high-price strategy, since it yields the highest combined profits. If both firms choose the high-price strategy, then their total profit will be $1,250,000 (the sum of profits in the upper right cell for both firms). Therefore, the best choice for both firms is to collude and choose the high-price strategy.

Answer the Next Question Based on the Following Payoff Matrix