Table 16-4
In the following duopoly game, the two firms can either set the price of their product high or low. In this market, customers are very price sensitive: when one firm sets a low price it steals the majority of customers from its competitor. The game is represented in the table below.

-Refer to Table 16-4. The Nash-equilibrium in this market is:

Question

Table 16-4
In the following duopoly game, the two firms can either set the price of their product high or low. In this market, customers are very price sensitive: when one firm sets a low price it steals the majority of customers from its competitor. The game is represented in the table below.
 
-Refer to Table 16-4. The Nash-equilibrium in this market is:

Quizplus · Accepted Answer

In a Nash equilibrium, neither firm has an incentive to change their strategy given the other firm's strategy. In this game, the only Nash equilibrium is when both firms set a low price and earn $400 each. If either firm were to deviate from this strategy and set a high price, they would lose a significant portion of their customers to the other firm and earn less profit. Therefore, the Nash equilibrium is firm A gets $400, firm B gets $400.

Table 16-4 In the Following Duopoly Game, the Two Firms Can Either