See scenario and figure below to answer rest of the questions Suppose two compan
ID: 1119053 • Letter: S
Question
See scenario and figure below to answer rest of the questions Suppose two companies, ABC and QRS, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. ABC's Decision ABCs paoft-$14 mabon High price peofit-$10m Decisien Law price QRSsprofit-$14 mallion e.(I point) If the two companies make their pricing decisions independently, then regardless of whether QRS will be charging a high or a low price, it is likely that ABC will be charging [Dominant strategy of ABC](please circle one) f. (I point) If the two companies make their pricing decisions independently, then regardless of whether ABC will be charging a high or a low price, it is likely that QRS will be charging Dominant stratcgy of ORS] (please circle one) g. (I point) If this game is played only once, then what is the most likely outcome? (please circle one) h. (I point) Suppose ABC and QRS colluded and reached an agreement. After one month, the outcome of the game shows ABC's profit is S4 million and QRS's profit is $14 million. The most likely explanation for this outcome is that (please circle one)Explanation / Answer
When ABC selects High price, QRS has a higher profit at $14 by charging a lower price. When ABC selects low price, QRS has a higher profit at $6.5 by charging a lower price. Same is true for ABC.
e) Both firms have dominant strategy of Low price so it will be the selected choice no matter what the rival does. CIRCLE LOW PRICE
f) Again, both firms have dominant strategy of Low price so it will be the selected choice no matter what the rival does. CIRCLE LOW PRICE
g) BOTH FIRM WILL CHARGE LOW PRICE
h) Colluded outcome is High price High price. Since ABC is still having High price as the colluded outcome, it is QRS that has cheated.