Table 11-7 Table 11-7 Shows the Payoff Matrix for Wal-Mart and Target

Table 11-7
$\begin{array}{c}\text { Wal-Mart's (W) Choices }\\\text { Target's (T) Choices }\begin{array}{|c|c|c|} \hline&{\text { High Price }} & {\text { Low price }} \\\hline {\text { High Price }} & \begin{array}{l}\text { W: } \$ 10,000 \text { profit } \\\text { T: } \$ 10,000 \text { profit }\end{array} & \begin{array}{l}\text { W: } \$ 5,000 \text { profit } \\\text { T: } \$ 14,000 \text { profit }\end{array} \\\hline {\text { Low price }} & \begin{array}{l}\text { W: } \$ 14,000 \text { profit } \\\text { T: } \$ 5,000 \text { profit }\end{array} & \begin{array}{l}\text { W: } \$ 7,000 \text { profit } \\\text { T: } \$ 7,000 \text { profit }\\\end{array}\end{array}\end{array}$
Table 11-7 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.Suppose Wal-Mart and Target both advertise that they will match the lowest price offered by any competitor.What is the purpose of such a strategy?

A) to signal to each other not to charge below the current low price
B) to signal to each other that they will not hesitate to initiate a price war
C) to signal to each other that they intend to charge the high price
D) to signal to each other to share the market equally

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free