Table 251 $\quad$ $\quad$ $\quad$ $\quad$ $\quad$

Table 25.1 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Company XYZ's Possible Responses }$
$\begin{array} { | l | c | c | } \hline \text { Company ABC's Action } & \text { Charge hiph Prices } & \text { Charge low Prices } \\\hline \text { Charge hiph Prices } & \text { Profit gair/loss= } \$ 0 & \text { Profit loss } = \$ 5,000 \\\hline \text { Charge low Prices } & \text { Profit gain= } \$ 50,000 & \text { Profit loss } = \$ 500 \\\hline\end{array}$ Given the payoff matrix in Table 25.1,if the probability of rivals matching a price reduction is 99 percent,what is the expected payoff for a price cut by Company ABC?

A) $0.
B) $5.
C) -$500.
D) -$5,000.

Correct Answer:

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