Exhibit 10-6 Two-Firm Payoff Matrix
-Suppose costs are identical for the two firms in Exhibit 10-6. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:

Question

Exhibit 10-6 Two-Firm Payoff Matrix 
-Suppose costs are identical for the two firms in Exhibit 10-6. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:

Quizplus · Accepted Answer

If both firms assume the other will charge a lower price, they will both choose to charge the low price to remain competitive, leading to an equilibrium where both firms charge the low price.