Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game?
A) Both firms cut prices.
B) A cuts and B colludes.
C) B cuts and A colludes.
D) Both firms collude.

Question

Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model:  Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game?
A) Both firms cut prices. 
B) A cuts and B colludes. 
C) B cuts and A colludes. 
D) Both firms collude.

Quizplus · Accepted Answer

The Answer of Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model:  Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game?
A) Both firms cut prices. 
B) A cuts and B colludes. 
C) B cuts and A colludes. 
D) Both firms collude.

Consider the Following Payoff Matrix for a Game in Which