The following payoff matrix shows the possible profits that each firm will earn under different pricing strategies. The firms can choose to have lower prices in order to lure away customers from the competitors or higher prices in order to increase their profits. The profits are measured in million dollars. At the Nash equilibrium, _____.Figure 9.5:

Question

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The Nash equilibrium occurs when both firms have no incentive to change their strategy given the strategy of the other firm. In this case, the Nash equilibrium occurs at (High, High) as neither firm can increase their profit by switching to a different strategy given the other firm's chosen strategy. At this equilibrium, General Mills earns $25 million and Kellogg's earns $30 million. Therefore, the answer is D.

The Following Payoff Matrix Shows the Possible Profits That Each