Which of the following is true when a Nash equilibrium is reached in a duopoly with homogeneous products?

Question

Quizplus · Accepted Answer

When a Nash equilibrium is reached in a duopoly with homogeneous products, both firms earn zero economic profits. This is because they both produce the same product with identical costs, leading to a price war where prices are lowered until profits are eliminated. Neither firm can increase its market share without lowering the price, which would lead to further price reductions and overall lower profits. Therefore, the Nash equilibrium in this situation results in both firms earning zero economic profits.

Which of the Following Is True When a Nash Equilibrium