-Consider the noncooperative, static, pricing game depicted in Figure 3.2. Firms A and B can charge a high price or a low price for their products. Payoffs are in thousands of dollars. If larger payoffs are preferred, the Nash equilibrium strategy profile for this game is: I. {High price, High price}.
II) {High price, Low price}.
III) {Low price, High price}.
IV) {Low price, Low price}.
Which of the following is correct?

Question

Quizplus · Accepted Answer

In a noncooperative pricing game, the Nash equilibrium occurs when neither firm can benefit by unilaterally changing its strategy. Both firms charging a low price (IV) is a Nash equilibrium if neither can increase their payoff by switching to a high price. Similarly, both charging a high price (I) can be a Nash equilibrium if neither benefits from switching to a low price.

-Consider the Noncooperative, Static, Pricing Game Depicted in Figure 3