Firm A? High PriceLow PriceFirm BHigh priceA = $250A = $325??B = $250B = $200?Low priceA = $200A = $175??B = $325B = $175Refer to the above payoff matrix. Which of the following statements is most accurate?
A. There is no incentive for the firms in this industry to collude.
B. The most likely outcome of this game is that one firm will price high and the other will price low.
C. The competitive equilibrium for this game is for both firms to price high.
D. If the two firms collude to price high, given the opportunity, firm B will cheat on the agreement and price low to increase profits.
Answer: D
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