Table 17-15.This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q)to produce: 2 units or 3 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B).

-Refer to Table 17-15.Which of the following outcomes represent the Nash equilibrium in this game?

Question

Table 17-15.This table shows a game played between two firms,Firm A and Firm B.In this game each firm must decide how much output (Q)to produce: 2 units or 3 units.The profit for each firm is given in the table as (Profit for Firm A,Profit for Firm B).
 
-Refer to Table 17-15.Which of the following outcomes represent the Nash equilibrium in this game?

Quizplus · Accepted Answer

Nash equilibrium occurs when no player can improve their outcome by changing their strategy unilaterally. In this game, if Firm A produces 2 units, Firm B's best response is also to produce 2 units, as it yields them a higher profit than producing 3 units. Similarly, if Firm A produces 3 units, Firm B's best response is to produce 3 units as it yields them a higher profit than producing 2 units. Therefore, (Q=2, Q=2) and (Q=3, Q=3) are both Nash equilibria.