Companies Alpha Steel and Beta Steel produce steel.Both companies made only $1 million in profits last year offering both steel rods and steel plates.If Alpha Steel produces just steel rods,and Beta Steel produces just steel plates,both companies will make 5 times as much profit as they do now.However,if Alpha Steel makes both rods and plates and Beta Steel only makes steel plates,Alpha Steel will make 10 times as much profit as they do now,and Beta Steel will make no profit.Likewise,if Beta Steel makes both rods and plates and Alpha Steel only makes steel rods,Beta Steel will make 10 times as much profit as they do now,and Alpha Steel will make no profit.The Nash Equilibrium and optimal result are:

Question

Quizplus · Accepted Answer

The Nash Equilibrium is for each company to concentrate on one product, as this maximizes their individual profits without cooperation. The optimal result, however, is for both companies to offer both products, as this would maximize the total profit for both companies combined.

Companies Alpha Steel and Beta Steel Produce Steel