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Two firms, Firm A and Firm B, agree to form a cartel and set a 'High' price. The table below shows the resulting daily profits (in thousands of dollars) for both firms based on the pricing strategy each chooses. The first number in each pair is Firm A's profit, and the second is Firm B's profit.
| Firm B: High Price | Firm B: Low Price | |
|---|---|---|
| Firm A: High Price | (100, 100) | (20, 120) |
| Firm A: Low Price | (120, 20) | (30, 30) |
Based on this information, and assuming each firm acts to maximize its own profit, what is the most likely outcome for this cartel agreement?
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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