Scenario: Two firms in a market must choose between two alternative strategies: X and Y. The figure below shows the game tree that these firms can use to make their decisions.

-Refer to the scenario above.In equilibrium,________.

Question

Scenario: Two firms in a market must choose between two alternative strategies: X and Y. The figure below shows the game tree that these firms can use to make their decisions.
 
-Refer to the scenario above.In equilibrium,________.

Quizplus · Accepted Answer

In equilibrium, both firms will choose the strategy that maximizes their profit. In this case, Firm 1 will choose Strategy Y and Firm 2 will choose Strategy X.

Scenario: Two Firms in a Market Must Choose Between Two