The following provides information for a one-shot game. What are the Nash equilibrium strategies for this game?
A) (low price, low price)
B) (high price, high price)
C) (low price, low price) and (high price, high price)
D) None of the answers is correct.

Question

The following provides information for a one-shot game.  What are the Nash equilibrium strategies for this game?
A) (low price, low price) 
B) (high price, high price) 
C) (low price, low price) and (high price, high price) 
D) None of the answers is correct.

Quizplus · Accepted Answer

In a one-shot game, players cannot rely on repeated interactions to influence their behavior, so they tend to act in self-interest and make decisions that maximize their individual payoffs. In this game, both players have two options: to set a high price or a low price. If both players set a high price, they will each earn a payoff of 2. If both players set a low price, they will each earn a payoff of 1. If one player sets a high price and the other sets a low price, the player who sets a high price will earn 4 and the player who sets a low price will earn 0.

To find the Nash equilibrium, we need to look for a combination of strategies where each player's strategy is a best response to the other player's strategy. In this game, both (low, low) and (high, high) are Nash equilibrium strategies, because neither player can improve their payoff by switching to the other strategy, given what the other player is doing. If one player switches to a different strategy, then they will earn a lower payoff, as the other player will respond accordingly. Therefore, the best choice(s) is to select strategy C, where both low price and high price options are played.

The Following Provides Information for a One-Shot Game