Hotel Price Fixing? Waikiki Beach has two hotels, one run by Juan and a second run by Tulah. The average cost of providing rooms is constant at $30 per day. Assume that low-price guarantees are...

Hotel Price Fixing? Waikiki Beach has two hotels, one run by Juan and a second run by Tulah. The average cost of providing rooms is constant at $30 per day. Assume that low-price guarantees are illegal. Here are the possible outcomes:

• Price fixing (cartel). Each firm has 30 customers at a price of $40.

• Duopoly (no price fixing). Each firm has 40 customers per day at a price of $37.

• Underpricing (one firm charges $40 and the other charges $37). The low-price firm has 50 customers and the high-price firm has 10 customers.

Juan chooses a price first, followed by Tulah. Draw a game tree for the price-fixing game and predict the outcome.