Identifying a Best Response Strategy
Two competing bakeries, 'Sweet Treats' and 'Crumb & Co.', are deciding whether to set a 'High Price' or a 'Low Price' for their signature cupcake. The table below shows the daily profits for each bakery based on their pricing decisions. The first number in each pair represents the profit for Sweet Treats, and the second number represents the profit for Crumb & Co.
| Crumb & Co.: High Price | Crumb & Co.: Low Price | |
|---|---|---|
| Sweet Treats: High Price | ($150, $140) | ($90, $160) |
| Sweet Treats: Low Price | ($180, $80) | ($120, $110) |
If Crumb & Co. decides to set a 'Low Price', what is Sweet Treats' best response? Explain your reasoning by comparing the relevant payoffs.
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Economics
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Introduction to Microeconomics Course
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CORE Econ
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