|Firm D||Firm D|
|High Price||Low Price|
|Firm C||High Price||600, 500||350, 550|
|Firm C||Low Price||450, 400||450, 300|
The payoff matrix above shows the potential earnings of two firms, C and D, who belong to a cartel and are currently colluding on a (high price) pricing strategy. The first entry in each cell shows Firm C’s expected revenue while the second entry shows Firm D’s expected revenue.
Which of the statements is correct about the firm with the greatest incentive to cheat (choose a low price) on its cartel partner?