-Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium
A) Dell keeps its prices high and Gateway lowers its prices.
B) both Dell and Gateway lower prices.
C) Gateway keeps its prices high and Dell lowers its prices.
D) both Dell and Gateway keep prices high.

Question

-Dell and Gateway must decide whether to lower their prices, based on the potential economic profits shown in the payoff matrix above. (The profits are in millions of dollars.) In the Nash equilibrium
A) Dell keeps its prices high and Gateway lowers its prices. 
B) both Dell and Gateway lower prices. 
C) Gateway keeps its prices high and Dell lowers its prices. 
D) both Dell and Gateway keep prices high.

Quizplus · Accepted Answer

Both Dell and Gateway lower prices because this is the only strategy combination that results in a positive economic profit for both firms.

-Dell and Gateway Must Decide Whether to Lower Their Prices