A Nash equilibrium in the duopoly game
A) means that one player has greater market power.
B) occurs when each player takes the best possible action regardless of the strategy chosen by other firms.
C) will always lead to equilibrium in which the firms' total profit is the largest.
D) can occur only if firms cooperate with each other.
E) means that a firm must be able to determine its actions and the actions of its competitor.

Question

Quizplus · Accepted Answer

A Nash equilibrium occurs when each player takes the best possible action given the strategy chosen by the other player, and neither player has an incentive to change their strategy. It does not necessarily mean that one player has greater market power, nor does it require cooperation between firms. The equilibrium may not lead to the largest total profit for both firms. Therefore, option B is the correct answer.

A Nash Equilibrium in the Duopoly Game