(Step-by-Step) Given the following payoff matrix, (a) indicate the best strategy for each firm. (b) Why is the entry deterrent threat by firm A to lower
Question: Given the following payoff matrix, (a) indicate the best strategy for each firm. (b) Why is the entry deterrent threat by firm A to lower the price not credible to firm B? (c) What could firm A do to make its threat credible without building excess capacity?
Firm B
Enter Don’t Enter
Low Price (3, -1) (3, 1)
Firm A
High Price (4, 5) (6, 3)
***The strategies for firm A are low price and high price and the strategies for firm B are enter and don’t enter. 10 (b) is asking whether firm A will use the low price as a threat if firm B enters?
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