Firm X is deciding whether to collaborate with its rival so that their combined profit is $4000 a month ($2000 each). It found that, if it chose not to collaborate, its own profit would be $2800 a month if it retained all of its customers. Yet, if its rival cut X’s price and won some of X’s customers, X’s profit would fall to $1200. It does not know what policy the rival will follow. What term describes the situation the firm is facing?
- Amonopoly profit maximisation
- Bprincipal agent problem
- Cprisoner’s dilemma
- Dsatisficing