Airporter Price Fixing? Hustle and Speedy provide transportation service from downtown to the city airport. Assume that low-price guarantees are illegal. The average cost per passenger is constant at $10. Here are the possible outcomes: (Enter your responses as integers.) Price-fixing (cartel). Each firm has 15 passengers at a price of $27. Corresponding profit for each firm will be $ Price = $27 Hustle: $255 Speedy: $255 Duopoly (no price-fixing). Each firm has 22 passengers at a price of $20. Corresponding profit for each firm will be $ Price = $27 Speedy Hustle: $68 Speedy: $390 Underpricing (one firm charges $20 and the other charges $27). The low-price firm has 39 passengers and the high-price firm has 4 passengers. Corresponding profit for the low-price firm will be $, and profit for the high-price firm will be Price = $20 Hustle Price = $27 Hustle: $390 Speedy: $68 Price = $20 Hustle chooses a price first, followed by Speedy. A game tree for the price-fixing game with corresponding profits is depicted to the right. Speedy Hustle: $220 Price = $20 Speedy: $220 Predict the outcome. O A. Hustle will choose price of $20 and Speedy will choose a price of $27. O B. Hustle and Speedy will both choose a price of $20. OC. Hustle and Speedy will both choose a price of $27. O D. Hustle will choose price of $27 and Speedy will choose price of $20.
Airporter Price Fixing? Hustle and Speedy provide transportation service from downtown to the city airport. Assume that low-price guarantees are illegal. The average cost per passenger is constant at $10. Here are the possible outcomes: (Enter your responses as integers.) Price-fixing (cartel). Each firm has 15 passengers at a price of $27. Corresponding profit for each firm will be $ Price = $27 Hustle: $255 Speedy: $255 Duopoly (no price-fixing). Each firm has 22 passengers at a price of $20. Corresponding profit for each firm will be $ Price = $27 Speedy Hustle: $68 Speedy: $390 Underpricing (one firm charges $20 and the other charges $27). The low-price firm has 39 passengers and the high-price firm has 4 passengers. Corresponding profit for the low-price firm will be $, and profit for the high-price firm will be Price = $20 Hustle Price = $27 Hustle: $390 Speedy: $68 Price = $20 Hustle chooses a price first, followed by Speedy. A game tree for the price-fixing game with corresponding profits is depicted to the right. Speedy Hustle: $220 Price = $20 Speedy: $220 Predict the outcome. O A. Hustle will choose price of $20 and Speedy will choose a price of $27. O B. Hustle and Speedy will both choose a price of $20. OC. Hustle and Speedy will both choose a price of $27. O D. Hustle will choose price of $27 and Speedy will choose price of $20.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.2P
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Transcribed Image Text:Airporter Price Fixing? Hustle and Speedy provide transportation service from downtown to the city airport. Assume
that low-price guarantees are illegal. The average cost per passenger is constant at $10. Here are the possible
outcomes: (Enter your responses as integers.)
Price = $27 Hustle: $255
Speedy: $255
Price-fixing (cartel). Each firm has 15 passengers at a price of $27. Corresponding profit for each firm will be $
Duopoly (no price-fixing). Each firm has 22 passengers at a price of $20. Corresponding profit for each firm will be $
Speedy
Price = $27
Hustle: $68
Speedy: $390
Underpricing (one firm charges $20 and the other charges $27). The low-price firm has 39 passengers and the high-price
firm has 4 passengers. Corresponding profit for the low-price firm will be $ and profit for the high-price firm will be
Price = $20
Hustle
Price = $27
Hustle: $390
Speedy: $68
Price = $20
Hustle chooses a price first, followed by Speedy. A game tree for the price-fixing game with corresponding profits is
depicted to the right.
Speedy
Hustle: $220
Price = $20 Speedy: $220
Predict the outcome.
O A. Hustle will choose a price of $20 and Speedy will choose a price of $27.
O B. Hustle and Speedy will both choose a price of $20.
O C. Hustle and Speedy will both choose a price of $27.
O D. Hustle will choose a price of $27 and Speedy will choose a price of $20.
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