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.In equilibrium,________.
A) both firms will offer a discount
B) neither firm will offer a discount
C) Firm 1 will offer a discount, while Firm 2 will not offer a discount
D) Firm 1 will continue charging the original price, while Firm 2 will offer a discount
Correct Answer:
Verified
Correct Answer:
Verified
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