The two largest auto manufacturers,Toyota and GM,have experimented with electric cars in the past,and they are currently considering the decision to introduce an electric car into the commercial automobile market.The payoffs from the possible actions are measured in millions of dollars per year,and the possible outcomes are summarized in the following game matrix: If both firms enter the market simultaneously,what is the Nash equilibrium?
A)Toyota produces and GM does not produce.
B)GM produces and Toyota does not produce.
C)There are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce.
D)There is no Nash equilibrium in this game.

Question

The two largest auto manufacturers,Toyota and GM,have experimented with electric cars in the past,and they are currently considering the decision to introduce an electric car into the commercial automobile market.The payoffs from the possible actions are measured in millions of dollars per year,and the possible outcomes are summarized in the following game matrix:  If both firms enter the market simultaneously,what is the Nash equilibrium?
A)Toyota produces and GM does not produce. 
B)GM produces and Toyota does not produce. 
C)There are two Nash equilibria - GM produces and Toyota does not produce,or Toyota produces and GM does not produce. 
D)There is no Nash equilibrium in this game.

Quizplus · Accepted Answer

In this game matrix, both firms have a dominant strategy of producing, meaning that regardless of the other firm's decision, each firm is better off producing. However, if both firms produce, they both receive lower payoffs than if only one firm produces. Therefore, there are two Nash equilibria - either one firm produces while the other does not, or both firms produce and receive lower payoffs. It is impossible for either firm to improve their payoff by changing their strategy, given the other firm's decision. Therefore, the best choice is for only one firm to produce while the other does not, resulting in the highest possible payoffs for each firm.

The Two Largest Auto Manufacturers,Toyota and GM,have Experimented with Electric