Question

Consider Figure 26-2. Suppose conditions in the industry change in such a way that the amount that each firm makes if it charges a high price when the other firm charges low price increases from $\backslash (2$million to $\backslash )3$million. Is the firm's pricing decision altered by this change and, if so, in what way? Explain briefly.

Short answer

the firm's pricing decision is unaltered by this change

Step-by-step solution

Given Information

From the above take care of the network, it very well may be gathered that both the organizations will pick low costs as their best technique.

Explanation Part (1)

In view of the given result network, we should draw the overhauled framework portraying the adjustment of the sum that each firm makes on the off chance that it charges an exorbitant cost when the other firm charges low-cost increments from $\$2$million to $\$3$million.

Assuming that Firm $2$charges an exorbitant cost, Firm 1's best procedure is to charge a low cost as that will give a result of $\$8$million.

Explanation Part (2)

Once more, in the event that Firm 2 charges a low value, Firm 1's best system is to charge a low cost as that will give a result of $\$4$million. Thusly, charging a low cost is the prevailing technique of Firm $1$.

Essentially, for Firm 2 the prevailing methodology will be to charge a low cost.

In this way, even after the adjustment of the result grid, the value choice of the organizations stays unaltered.