Suppose Rareair honors an agreement to price high with uptown. based on the figure, if uptown cheats and prices low instead of high, then uptown can increase its payout by $3 million.
If Uptown cheats and prices low instead of high, then Uptown can increase its payout by $3 million. This is because, if Uptown prices low and RareAir honors the agreement to price high, then Uptown will gain a larger market share and sell more products than it would if both companies priced high. This will increase Uptown's profits.
Based on the image, as one can see, if Uptown prices low and RareAir prices high, Uptown's profit is $8 million, which is $3 million more than its profit if both companies price high.