Question

Megabucks and CashCow are the only two firms in a market. Each firm must decide whether to price high or price low. The payoffs from each strategy combination are shown to the right- in milions of dollars. The first number in each pair is Megabucks profit; the second is CashCow's profit Price High -Cash Cow--Pnce Low and $70 $105 If the firms cooperate, the strategy that Megabucks will choose is the strategy that CashCow will choose is f the firms behave opportunistically, the strategy that Megabucks will choose is $70 $4 and the strategy that CashCow will choose is $4 $14 $105 $14 Cick to select your answers)

Answer 1

If the firms cooperate, the strategy that Megabucks will choose is Price high ($70) and cash cows will choose Price high($70).

If the firms behave oppourtunistically then the strategy Megabucks will choose is Price Low and the strategy Cash Cows will choose is Price Low.

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