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Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The Nash equilibrium in the cable TV market occurs when:
A)both firms set a low price and each earns $90,000.
B)both firms set a high price and each earns $100,000.
C)CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000.
D)CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000.

Question

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II)Use Figure: Pricing Strategy in Cable TV Market II.The Nash equilibrium in the cable TV market occurs when:
A)both firms set a low price and each earns $90,000. 
B)both firms set a high price and each earns $100,000. 
C)CableNorth sets a high price and earns $80,000,and CableSouth sets a low price and earns $130,000. 
D)CableNorth sets a low price and earns $130,000,and CableSouth sets a high price and earns $80,000.

Quizplus · Accepted Answer

The Nash equilibrium occurs when both firms choose the strategy that maximizes their profit given the strategy of the other firm. In this case, both firms will choose to set a low price because this will maximize their profit given the strategy of the other firm.

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