Table 14-8 Two Rival Oligopolists in the Coffee Industry, Wide Awake and Coffee

Multiple Choice

Table 14-8

Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 14-8.If the two firms collude, is there an incentive for either to cheat on the collusion agreement?

A) No, neither firm can gain by cheating.
B) Yes, but only Zuma is in a position to gain by cheating.
C) Yes, but only Wide Awake is in a position to gain by cheating.
D) Yes, either firm can gain if it, alone, cheats.