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Given the Payoff Matrix in Table 25

Question 57

Multiple Choice

 Company XYZ’s Possible Responses  Company ABC’s Action  Charge High Prices  Charge Low Prices  Charge high prices  Profit gain loss =$0 Profit loss =$5,000 Charge low prices  Profit gain =$50,000 Profit loss =$500 Table 25.1\begin{array}{l}\begin{array} { | l | l | l | } \hline & { \text { Company XYZ's Possible Responses } } \\\hline \text { Company ABC's Action } & \text { Charge High Prices } & \text { Charge Low Prices } \\\hline \text { Charge high prices } & \text { Profit gain loss } = \$ 0 & \text { Profit loss } = \$ 5,000 \\\hline \text { Charge low prices } & \text { Profit gain } = \$ 50,000 & \text { Profit loss } = \$ 500 \\\hline\end{array}\\\text { Table } 25.1\end{array} Given the payoff matrix in Table 25.1, if the probability of rivals reducing their price even though you don't is 10 percent, what is the expected payoff for Company ABC not cutting prices?


A) $0.
B) $5.
C) -$500.
D) -$5,000.

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