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Business Economics
ECM002 Business Economics

Instructions: Please answer four out of the following six following questions:

Question 1. Suppose Cola- Sol and Miniranda are the only two companies producing a particular type of cola drink in the soft drink industry. Both companies are considering launching a new drink with a light lemon twist. They can launch their products either at a low price or at a high price. The expected net payoffs are the following:
If both companies choose a high price strategy, Cola- Sol will get €1200,000 and Miniranda €1200,000. If both companies decide to carry out a low price strategy Cola- Sol will get €1600,000 and Miniranda €1400,000. If Cola- Sol chooses a high price strategy and Miniranda low , Cola- Sol will get €1300,000 and Miniranda €1500,000. If Cola- Sol goes for a low price and Miniranda for high, Cola- Sol will get €1500,000 and Miniranda €1200,000.

a) Suppose the two companies reach a decision simultaneously. Display the information provided above in a strategic form.

|Cola Sol high |Cola Sol low |
|1200000 |1500000 |
| | |
|Miniranda high |Miniranda high |
|1200000 |1200000 |
|Cola Sol high |Cola Sol low |
|1300000 |1600000 |
|
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