Question: Given the following payoff matrix

(The strategies for firm A are low price and high price and the strategies for firm B are enter and don’t enter)

1. indicate the best strategy for each firm
2. Why is entry-deterrent threat by firm A to lower prices not credible to firm B? (this question is asking whether firm A will use the low price as a threat if firm B enters)
3. What could firm A do to make its threat credible without building excess capacity?

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Solution: The downloadable solution consists of 1 pages
Deliverable: Word Document