In a battle of Boeing and Airbus, a Nash equilibrium will exist if
A)they both have agreed to a monopoly pricing structure.
B)they are presently operating at a point where neither one would benefit by unilaterally changing strategies.
C)Boeing has the power to drive Airbus out of business with a predatory pricing strategy.
D)both pass up profit opportunities because they fear retaliation.

Question

Quizplus · Accepted Answer

A Nash equilibrium occurs when both firms are operating at a point where neither one would benefit by unilaterally changing strategies. This means they have reached a stable outcome where they are both maximizing their profits and cannot improve their position by changing their strategy. Option A is incorrect because a monopoly pricing structure is not necessary for a Nash equilibrium to exist. Option C is incorrect because predatory pricing would not lead to a Nash equilibrium as it would not be a mutually beneficial outcome. Option D is incorrect because both firms would not pass up profit opportunities in a Nash equilibrium, as they would both be maximizing their profits.

In a Battle of Boeing and Airbus, a Nash Equilibrium