-Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The yearly economic profits from each strategy are indicated in Figure 11-12.The upper right side of each rectangle shows Brian's profits;the lower left side shows Matt's profits.Which of the following statements is correct for a one-trial game?
A)The market equilibrium price is the high price.
B)A market equilibrium price cannot be established unless Brian and Matt collude.
C)A market equilibrium price cannot be established unless Brian or Matt engages in tit-for-tat strategy.
D)A market equilibrium price cannot be established without repeated trials.
E)The market equilibrium price is the low price.

Question

-Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The yearly economic profits from each strategy are indicated in Figure 11-12.The upper right side of each rectangle shows Brian's profits;the lower left side shows Matt's profits.Which of the following statements is correct for a one-trial game?
A)The market equilibrium price is the high price. 
B)A market equilibrium price cannot be established unless Brian and Matt collude. 
C)A market equilibrium price cannot be established unless Brian or Matt engages in tit-for-tat strategy. 
D)A market equilibrium price cannot be established without repeated trials. 
E)The market equilibrium price is the low price.

Quizplus · Accepted Answer

In a one-trial game, both Brian and Matt will choose the strategy that maximizes their individual profits, leading to a Nash equilibrium at the low price.

-Brian and Matt Own the Only Two Bicycle Repair Shops