Refer to the 'Expected payoff formula below: Expected payoff...
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Refer to the 'Expected payoff formula below: Expected payoff zivals matching pice cuts Suppose the payoff for each of four strategic interactions is as follows: Probability of Size of loss from] [Probability of rivals Gain from lone not matching price cut Rival Response Your Company's Action Reduce Price Don't Reduce Price Reduce Price Loss - $800 Loss $6,000 Don't Reduce Price Gain $50,000 No Loss or Gain Instructions: Enter your responses as a whole number. Indicate a negative response with a (-) negative sign. (a) If the probability of rivals matching a price reduction is 96 percent, what is the expected payoff to a price cut? (b) If the probability of rivals reducing price even though you don't is 6 percent, what is the expected payoff to not reducing price? References eBook & Resources Worksheet Learning Objective: 11-03 How interdependence affects oligopolists pricing decisions
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