Figure: Payoff Matrix for Jake and Zoe
(Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe.Jake and Zoe are the only producers of slushies in their tourist town.Each week, each decides whether to price high or price low for the following week.The figure shows the profit per week earned by their two firms.What is the Nash equilibrium for Jake and Zoe?
A)Jake prices high; Zoe prices high.
B)Jake prices high; Zoe prices low.
C)Jake prices low; Zoe prices high.
D)Jake prices low; Zoe prices low.

Question

Quizplus · Accepted Answer

The Nash equilibrium occurs when both players choose strategies where neither has anything to gain by changing only their own strategy. In this case, both pricing low is likely the Nash equilibrium as changing to a high price would decrease their profit given the other's strategy.