Multiple Choice
Scenario: Two rival firms charge equal prices for their products, which are perfect substitutes. Firm 1 is considering offering a 10 percent discount on the market price to increase sales. The game tree below shows the respective payoffs to each firm, depending on the decisions each makes.
-Refer to the scenario above.Which of the following is true?
A) Firm 2 should never offer a discount regardless of Firm 1's choice.
B) Firm 2 should offer a discount if Firm 1 offers a discount.
C) Firm 2 should always offer a discount regardless of Firm 1's plan.
D) Firm 1 should never choose to offer a discount regardless of Firm 2's plan.
Correct Answer:
Verified
Correct Answer:
Verified
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