Use the table below to answer the following questions.
Table 14.2.5
-Refer to Table 14.2.5.Two software firms have developed an identical new software application.They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy.The payoff matrix is above and the payoffs are profits in millions of dollars.What is the Nash equilibrium of the game?
A)Both Firm 1 and 2 will sell the software application at $30 a copy.
B)Both Firm 1 and 2 will give the software application away free.
C)Firm 1 will give the application away free and Firm 2 will sell it at $30.
D)Firm 1 will sell the application for $30 and Firm 2 will give it away.
E)There is no Nash equilibrium to this game.

Question

Use the table below to answer the following questions.
Table 14.2.5 
-Refer to Table 14.2.5.Two software firms have developed an identical new software application.They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy.The payoff matrix is above and the payoffs are profits in millions of dollars.What is the Nash equilibrium of the game?
A)Both Firm 1 and 2 will sell the software application at $30 a copy. 
B)Both Firm 1 and 2 will give the software application away free. 
C)Firm 1 will give the application away free and Firm 2 will sell it at $30. 
D)Firm 1 will sell the application for $30 and Firm 2 will give it away. 
E)There is no Nash equilibrium to this game.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. If both firms give the software away for free, neither firm can unilaterally change its strategy to increase its payoff, making it a Nash equilibrium.

Use the Table Below to Answer the Following Questions