Which of the following circumstances in an industry will result in a Nash equilibrium?
A) All firms have a dominant strategy and each firm chooses its dominant strategy.
B) All firms have a dominant strategy, but only some choose to follow it.
C) All firms have a dominant strategy, and none choose it.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

A Nash equilibrium occurs when all players in a game are choosing their best response given the choices of all other players. If all firms have a dominant strategy and each firm chooses its dominant strategy, then no firm has an incentive to deviate from its strategy, given the strategies of the others. This situation meets the definition of a Nash equilibrium.

Which of the Following Circumstances in an Industry Will Result