When an oligopoly market is in Nash equilibrium

Question

Quizplus · Accepted Answer

When an oligopoly market is in Nash equilibrium, each firm will choose its best pricing strategy, given the strategies that it observes other firms have taken. This means that each firm is acting in its own self-interest and trying to maximize its profits, while taking into account the actions of its competitors. In a Nash equilibrium, no firm can improve its profits by unilaterally changing its strategy, which leads to a stable outcome for the market as a whole. While collusion (A) is a possibility in an oligopoly, it is not necessary for a Nash equilibrium. Similarly, firms are always behaving as profit maximizers (B), and they are taking into account the strategies of their rivals (C) in order to make their own decisions.

When an Oligopoly Market Is in Nash Equilibrium