Suppose that two firms, A and B compete. They can choose different strategies a combination of low price or high quality. The tables below show the best practice frontiers for each firm.
As Possibilities
Price Quality
0 .. 12
1 8
2 4
3 0
Bs Possibilities
Price Quality
0 . 6
2 . 4
4 . 2
6 . 0
What is the cost to A of 1 unit of high quality? What is the cost to B of 1 unit of high quality? What is the cost to A of 1 unit of price? What is the cost to B of 1 unit of price? Which firm should focus on high quality? Which on low price? Explain.