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The payoff matrix presents the profits for Firms X and Y under their two individual pricing strategies. Suppose both firms have agreed to maximize their combined profits by colluding on their pricing strategies. Use the information in this payoff matrix to answer the two questions.Firm X strategyFirm Y strategy Low price High priceLow price Firm X Profit = 73Firm Y Profit = 73 Firm X Profit = 47Firm Y Profit = 103High price Firm X Profit = 103Firm Y Profit = 47 Firm X Profit = 81Firm Y Profit = 81Compare the profits of Firm X when both firms respect the collusive agreement to the profits of Firm X when Firm X secretly cheats on the agreement. How much additional profit would Firm X earn by secretly cheating on the agreement to collude? Round your answer to the nearest whole number.$Compare the profits of Firm Y when both firms respect the collusive agreement to the profits of Firm Y when both firms cheat on the agreement. By how much would the profits of Firm Y fall if both firms cheat on the agreement to collude? Round your answer to the nearest whole number.

Respuesta :

If both firms respect the collusive agreement, they would choose the pricing strategies that maximize their combined profits, which in this case is for Firm X to choose the low price strategy and for Firm Y to choose the high price strategy. This would result in Firm X earning a profit of 73 and Firm Y earning a profit of 81, for a total combined profit of 154.

If Firm X secretly cheats on the agreement by choosing the high price strategy, it would earn a profit of 103. This is an additional profit of 30 for Firm X compared to when both firms respect the agreement.

If both firms cheat on the agreement by choosing the high price strategy, they would each earn a profit of 81. This is a total combined profit of 162, which is an increase of 8 compared to when they respect the agreement. However, if both firms cheat on the agreement, the profits of Firm Y would fall by 18 compared to when they respect the agreement.

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