Table 11-13 Two Rival Oligopolists in the Athletic Supplements Industry, the Power

Table 11-13
$\begin{array}{c} \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad\text { Power Fuel's (P) Strategy }\\\text { Brawny Juice's (B) Strategy }\begin{array}{|c|c|c|} \hline& \text { High Price } & \text { Low Price } \\\hline{\text { High Price }} & \text { P: } \$ 12 \mathrm{~m} & \text { P: } \$ 16 \mathrm{~m} \\& \text { B: } \$ 12 \mathrm{~m} & \text { B: } \$ 4 m \\\hline {\text { Low Price }} & \text { P: } \$ 4 \mathrm{~m} & \text { P: } \$ 8 \mathrm{~m} \\& \text { B: } \$ 16 \mathrm{~m} & \text { B: } \$ 8 \mathrm{~m}\\\hline\end{array}\end{array}$
Two rival oligopolists in the athletic supplements industry, the Power Fuel Company and the Brawny Juice Company, have to decide on their pricing strategy.Each can choose either a high price or a low price.Table 11-13 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 11-13.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 Brawny Juice is in a position to gain by cheating.
C) Yes, but only Power Fuel is in a position to gain by cheating.
D) Yes, either firm can gain if it alone cheats.

Correct Answer:

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