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?

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?