In a twofirm industry, a Nash equilibrium occurs
Whenever:
A)each firm makes decisions without consideration of the other firm's actions.
B)the first firm makes decisions without consideration for the second firm's actions, whereas the second firm does
Consider the first firm's actions.
C)the second firm makes decisions without consideration for the first firm's actions, whereas the first firm does
Consider the second firm's actions.
D)each firm considers all possible actions by other firms and then chooses the best strategy.

Question

In a two­firm industry, a Nash equilibrium occurs
Whenever:
A)each firm makes decisions without consideration of the other firm's actions.
B)the first firm makes decisions without consideration for the second firm's actions, whereas the second firm does
Consider the first firm's actions.
C)the second firm makes decisions without consideration for the first firm's actions, whereas the first firm does
Consider the second firm's actions.
D)each firm considers all possible actions by other firms and then chooses the best strategy.

Quizplus · Accepted Answer

A Nash equilibrium occurs when both firms consider all possible actions by the other firm and then make their decisions based on their own best strategy. This leads to a situation where neither firm has an incentive to change their strategy, as any deviation from the current strategy would result in a worse outcome for that firm. Therefore, both firms are "satisfied" with their current strategy, making it a stable equilibrium.

In a Two­firm Industry, a Nash Equilibrium Occurs

In a Twofirm Industry, a Nash Equilibrium Occurs