Table 11-5 Table 11-5 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-5.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Question

Table 11-5  Table 11-5 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-5.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Quizplus · Accepted Answer

The payoff matrix shows that both firms can earn a higher profit of $10,000 each if they both agree to charge a high price. This is known as implicit collusion, where firms act as if they are colluding without actually making a formal agreement. Therefore, there is a better outcome for each firm to consider.

Table 11-5 Table 11-5 Shows the Payoff Matrix for Wal-Mart