Bert and Ernie Are Noncolluding Oligopolists

Bert and Ernie are noncolluding oligopolists.If both choose a high price strategy,each makes $40 in profits; if both choose a low price strategy,each makes $30 in profits.If Bert chooses a high price strategy and Ernie chooses a low price strategy,Bert makes $20 in profits and Ernie makes $60 in profits,while if Bert chooses a low price strategy and Ernie chooses a high price strategy,Bert makes $60 in profits and Ernie makes $20 in profits.Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

A) Both choose a high price strategy.
B) Both choose a low price strategy.
C) Bert chooses a high price strategy and Ernie chooses a low price strategy.
D) Bert chooses a low price strategy and Ernie chooses a high price strategy.

Correct Answer:

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