The payoff matrix below shows the payoffs for Firm A and Firm B,each of whom can either "cooperate" or "cheat." The numbers in parentheses are (payoff for A,payoff for B). $\begin{array}{c}
&\text { Firm B }\
\text { Firm A }&
\begin{array}{l|cr}
& \text { Coop erate } & \text { Cheat } \
\hline \text { Cooperate } & (30,30) & (10, x) \
\text { Cheat } & (x, 10) & (20,20)
\end{array}\end{array}$
-Refer to Table 11- 2.If x = 40,what is the Nash equilibrium in this game?

Question

The payoff matrix below shows the payoffs for Firm A and Firm B,each of whom can either "cooperate" or "cheat." The numbers in parentheses are (payoff for A,payoff for B). $\begin{array}{c}
&\text { Firm B }\
\text { Firm A }&
\begin{array}{l|cr} 
& \text { Coop erate } & \text { Cheat } \
\hline \text { Cooperate } & (30,30) & (10, x) \
\text { Cheat } & (x, 10) & (20,20)
\end{array}\end{array}$
-Refer to Table 11- 2.If x = 40,what is the Nash equilibrium in this game?

Quizplus · Accepted Answer

When x = 40, both firms have an incentive to cheat because the payoff (40,10) or (10,40) is higher than cooperating (30,30). Thus, both cheating (20,20) becomes the Nash equilibrium as neither firm can benefit by unilaterally changing their strategy.

The Payoff Matrix Below Shows the Payoffs for Firm a and Firm