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Figure: Payoff Matrix for Jake and Zoe
-(Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, 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. According to the Nash equilibrium, Jake prices _____ and Zoe prices _____.
A) high; high
B) high; low
C) low; high
D) low; low

Question

Use the following to answer questions:
Figure: Payoff Matrix for Jake and Zoe 
-(Figure: Payoff Matrix for Jake and Zoe) Look at the figure Payoff Matrix for Jake and Zoe, 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. According to the Nash equilibrium, Jake prices _____ and Zoe prices _____.
A) high; high 
B) high; low 
C) low; high 
D) low; low

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. If both price low, neither can increase their profit by unilaterally changing their pricing strategy, making "low; low" the Nash equilibrium.

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