The following table shows the payoffs (profits) of the two firms in a duapoly industry who produce a nondifferentiated product. Each firm has two options: charge a high price of $70, or the minimum possible price of $50. The first number in the payoff cells is the profit of Firm A, and the second number is the profit of Firm B. Assume that both firms are after maximum profit.

-Refer to the table above.What is the equilibrium result in this duopoly market?

Question

The following table shows the payoffs (profits) of the two firms in a duapoly industry who produce a nondifferentiated product. Each firm has two options: charge a high price of $70, or the minimum possible price of $50. The first number in the payoff cells is the profit of Firm A, and the second number is the profit of Firm B. Assume that both firms are after maximum profit.
 
-Refer to the table above.What is the equilibrium result in this duopoly market?

Quizplus · Accepted Answer

In a duopoly market, firms often reach a Nash Equilibrium where neither firm can benefit by unilaterally changing their strategy if the other firm's strategy remains unchanged. Without the specific table, the general principle suggests that both firms setting the same price often leads to a stable outcome, assuming they are rational and have similar cost structures. Therefore, both firms charging $50 could represent such an equilibrium, assuming this price allows them to cover costs and maximize profits given the demand and competition.

The Following Table Shows the Payoffs (Profits) of the Two