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Figure: Payoff Matrix II for Blue Spring and Purple Rain
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. The Nash equilibrium in the figure is reached when Blue Spring charges a _____ price and Purple Rain charges a _____ price.
A) high; high
B) low; low
C) high; low
D) low; high

Question

Use the following to answer questions:
Figure: Payoff Matrix II for Blue Spring and Purple Rain 
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. The Nash equilibrium in the figure is reached when Blue Spring charges a _____ price and Purple Rain charges a _____ price.
A) high; high 
B) low; low 
C) high; low 
D) low; high

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. If both charge a low price, neither can benefit by unilaterally changing their price, making it the Nash equilibrium.

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