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Question
Table 14-7| Perfect Plants | Perfect Plants | ||
| Don't offer same-day delivery | Offer same-day delivery | ||
| Florabunda Florist | Don't offer same-day delivery | Florabunda earns $1,500 million profit/Perfect earns $1,500 million profit | Florabunda earns $800 million profit/Perfect earns $1,800 million profit |
| Florabunda Florist | Offer same-day delivery | Florabunda earns $1,800 profit/Perfect earns $800 million profit | Florabunda earns $1,000 million profit/Perfect earns $1,000 million profit |
The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not offer same-day delivery. The amount of profit for one firm depends on whether the other firm offers same-day delivery.
Refer to Table 14-7. Which of the following statements is true?
A) Given that Florabunda offers same-day delivery, Perfect's best strategy is to not offer same-day delivery.
B) Given that Perfect offers same-day delivery, Florabunda's best strategy is to offer same-day delivery.
C) Perfect and Florabunda will agree to collude in order to maximize their profits.
D) Neither Perfect nor Florabunda will offer same-day delivery; this decision will decrease their costs and allow each firm to earn more than $1,800 million in profits.
Answer
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