QUESTION 10 Two O Firm A should charge the collude price Fir

QUESTION 10 Two O Firm A should charge the collude price, Firm B should charge a cheat price. O Firm A should charge a cheat price, Firm B should charge a collude price. O Both firms should charge a collude price. Both firms should charge a cheat price Chest rice 6,30 MacBook Air 2 tab aps lock

Solution

  

Option D) is correct as both firms should charge cheat price.

It is so because

so option d) is correct Both firms shuld charge cheat price.

Option a) is incorrect because If Firm A charge Collude price and firm B charge cheat price the payoff of (firm A, firm B) will be (6,30) and for A the other option i.e., cheat price gives a higher payof of $18. So Firm A should not charge collude price when Firm B charges collude price.

option b) is incorrect because if Firm B charges Collude price and firm A charge cheat price the payoff of (firm A, firm B) will be (30,6) and for B the other option i.e., cheat price gives a higher payof of $18. So Firm B should not charge collude price when Firm A charges collude price.

option C) is also not correct as the best and dominant startegy for both firms is to charge cheat price.