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).
Firm B
Firm A TABLE 11-2
-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).
Firm B
Firm A  TABLE 11-2
-Refer to Table 11-2.If x = 40,what is the Nash equilibrium in this game?

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. If x = 40, both firms have an incentive to cheat because cheating provides a higher payoff regardless of the other firm's action. Thus, (cheat, cheat) is the Nash equilibrium.

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