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21 October, 15:24

Bert and Ernie are non-colluding oligopolists. If both choose a high price strategy, each makes $40 in profits; if both choose a low price strategy, each makes $30 in profits. If Bert chooses a high price strategy and Ernie chooses a low price strategy, Bert makes $20 in profits and Ernie makes $60 in profits, while if Bert chooses a low price strategy and Ernie chooses a high price strategy, Bert makes $60 in profits and Ernie makes $20 in profits. Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

A. Both choose a high price strategy.

B. Both choose a low price strategy.

C. Bert chooses a high price strategy and Ernie chooses a low price strategy.

D. Bert chooses a low price strategy and Ernie chooses a high price strategy.

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  1. 21 October, 16:48
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    Both choose a low price strategy

    Explanation:

    In simple words a low price strategy can be defined as a pricing policy where a firm pays a comparatively cheap price to fuel competition and win share of the market.

    This is part of three standardized marketing techniques (differentiation approach and concentration approachre the other two) that can be implemented by any organization and used where the commodity has little to no competitive edge or where productivity gains and higher manufacturing volume are feasible.
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