-The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety.The Nash equilibrium
A) is for just one of the firms to make the investment.
B) is for both firms to make the investment.
C) is for neither firm to make the investment.
D) does not exist.

Question

-The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety.The Nash equilibrium
A) is for just one of the firms to make the investment. 
B) is for both firms to make the investment. 
C) is for neither firm to make the investment. 
D) does not exist.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the strategies of all other players. If neither firm invests in worker safety, neither has an incentive to unilaterally change their strategy because doing so would reduce their payoff (assuming the payoff matrix reflects higher payoffs for not investing due to cost savings, and lower payoffs for unilateral investment due to higher costs without reciprocal industry-wide benefits).

-The Above Figure Shows the Payoff to Two Firms in an Industry