Firms A and B are two rivals that must choose a price strategy. If they both choose a high price, firm As profit is $75 and firm Bs profit is $75. If they choose a low price, firm As profit is $15 and firm Bs profit is $15. If A chooses a low price while B chooses a high price, As profit is -$75 (a loss) while Bs profit is $150. If A chooses a high price while B chooses a low price, As profit is $150 while Bs profit is -$75 (a loss). If Firm A and Firm B could sign a binding contractcontract

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    the optimal strategy would be for both Firm A and Firm B to charge low prices.
     Firm A charge a low price in order to earn a profit of $150.
     Firm A and Firm B would both charge higher prices.
     None of the above.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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Firm A and Firm B would both charge higher prices.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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