Question 18 Suppose that the pricing strategies for FiberOne and of Starlink are shown in the table below. They have to decide whether to charge a high or low price for their internet service. The four pairs of payoff values show what each company expects to earn or lose in millions of dollars, depending on what the other company does. Starlink’s Price Strategy High Price Low Price FiberOne’s Price Strategy Low Price High Price Starlink+$200 FiberOne +$200 Starlink-$100 FiberOne + 500 Starlink+$500 FiberOne – $100 Starlink+$100 FiberOne +$100 If it’s expected that the incomes of people living in rural Nigeria is expected to increase, what will the equilibrium outcome be, ceteris paribus? a) Starlink will charge a low price; FiberOne will charge a high price. b) Starlink will charge a high price; FiberOne will charge a low price. c) Both Starlink and FiberOne will charge a low price. d) Both Starlink and FiberOne will charge a high price. (4 marks)
