Solutions Economics

Suppose two competitors, Coa, Inc., and Han, Inc., are locked in a bitter pricing struggle in the al

Question: Suppose two competitors, Coa, Inc., and Han, Inc., are locked in a bitter pricing struggle in the aluminum industry. In the limit pricing payoff matrix, Coa can choose a given row of outcomes by offering a limit price ("up") or monopoly price ("down"). Han can choose a given column of outcomes by choosing to offer a limit price ("left") or monopoly price ("right"). Neither firm can choose which cell of the payoff matrix to obtain; the payoff for each firm depends upon the pricing strategies of both firms.

	Han
Coa	Pricing Strategy	Limit Price	Monopoly Price
	Limit Price	$1.5 billion, $3 billion	$2.5 billion, $2 billion
	Monopoly Price	$1 billion, $4 billion	$1.75 billion, $3 billion