Table 11-9
Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 11-9 shows the payoff matrix for this game.
-Refer to Table 11-9.What is the Nash equilibrium in this game?

Question

Table 11-9
  Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 11-9 shows the payoff matrix for this game.
-Refer to Table 11-9.What is the Nash equilibrium in this game?

Quizplus · Accepted Answer

Both Alpha and Beta offering a student discount is the Nash equilibrium in this game. If only one firm offers a discount, it will increase its profit, but if both firms offer a discount, they will share the market and split the profits, which is better than only one firm getting all the profits. Therefore, both firms offering a discount is the best choice for both of them.

Table 11-9 Alpha and Beta Are the Only Firms Selling