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Refer to the “Expected payoff” formula below: Suppose the payoff for each of four strategic interactions is as follows: Rival Response Your Company's Action Reduce Price Don’t Reduce Price Reduce Price Loss = $800 Gain = $50,000 Don’t Reduce Price Loss = $6,000 No Loss or Gain Instructions: Enter your responses as a whole number. Indicate a negative number with a (-) negative sign. (a) If the probability of rivals matching a price reduction is 98 percent, what is the expected payoff to a price cut? $ (b) If the probability of rivals reducing price even though you don’t is 5 percent, what is the expected payoff to not reducing price? $

Financial Accounting, Accounting

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