Figure 17-4. Two companies, Acme and Bilco, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.

-Refer to Figure 17-4.If this game is played only once,then the most likely outcome is that

Question

Figure 17-4. Two companies, Acme and Bilco, are sellers in the same market. Each company decides whether to charge a high price or a low price. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
 
-Refer to Figure 17-4.If this game is played only once,then the most likely outcome is that

Quizplus · Accepted Answer

In a one-time game, firms are likely to choose the strategy that maximizes their individual payoff, leading to a Nash equilibrium. In many pricing games, both firms charging a low price is a common Nash equilibrium because each firm tries to undercut the other to capture more market share, resulting in both firms choosing the low price strategy.