Homework Answers
a. Firm A profits= $1000
Firms B profits= $1000
reason- when firms collude their Profit will be maximum.
b. Firm A profit=$1250
Firm B profit= $300
reason- When one firm A cheats it will lower the price and firm B will keep high prices.
c. Firm A Profit=$700
Firm A strategy= Low price
Firm B strategy= Low price
Firm B Profit= $700
reason- When both firms act independently there Dominant strategy is to keep price low.
So profit for both firms is $700.
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