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Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The Nash equilibrium in the cable TV market occurs when:
A) both firms set a low price and each earns $90,000 per month.
B) both firms set a high price and each earns $100,000 per month.
C) CableNorth sets a high price and earns $80,000 per month, and CableSouth sets a low price and earns $130,000 per month.
D) CableNorth sets a low price and earns $130,000 per month, and CableSouth sets a high price and earns $80,000 per month.

Question

Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The Nash equilibrium in the cable TV market occurs when:
A) both firms set a low price and each earns $90,000 per month. 
B) both firms set a high price and each earns $100,000 per month. 
C) CableNorth sets a high price and earns $80,000 per month, and CableSouth sets a low price and earns $130,000 per month. 
D) CableNorth sets a low price and earns $130,000 per month, and CableSouth sets a high price and earns $80,000 per month.

Quizplus · Accepted Answer

In a Nash equilibrium, each firm chooses the best strategy given the strategy chosen by the other firm. Both firms setting a low price is a stable outcome where neither firm can benefit by unilaterally changing their strategy.

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