The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-The social cost of a transaction is _____.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-The social cost of a transaction is _____.

Quizplus · Accepted Answer

The social cost of a transaction includes both private costs (costs incurred by the parties involved in the transaction) and external costs (costs imposed on third parties who are not part of the transaction). In this case, the payoff matrix only considers the profit outcomes for the two firms involved in the transaction, but it does not consider any external costs imposed on third parties, such as environmental pollution or congestion. Therefore, the social cost cannot be determined from the given table.

The Table Below Shows the Payoff (Profit) Matrix of Firm