-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, Dell's profit is ________ million and Gateway's profit is ________ million.
A) $10; $10
B) $15; $15
C) $5; $20
D) $20; $5

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, Dell's profit is ________ million and Gateway's profit is ________ million.
A) $10; $10 
B) $15; $15 
C) $5; $20 
D) $20; $5

Quizplus · Accepted Answer

In the Nash equilibrium, both firms choose their best response given the other firm's choice. If both Dell and Gateway lower their prices, they each earn $10 million, which is the stable outcome where neither firm can benefit by unilaterally changing their strategy.

-Dell and Gateway Must Decide Whether to Lower Their Prices