Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.65) for their soft drinks.
Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.65) for their soft drinks.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Consider a market with two firms, Coke and Pepsi, that produce soft
drinks. Both firms must choose whether to charge a high price
($1.25) or a low price ($0.65) for their soft drinks.
These price strategies with corresponding profits are depicted in the
payoff matrix to the right. Coke's profits are in red and Pepsi's are in
blue.
Coke's dominant strategy is to pick a price of
dominant strategy is to pick a price of $
What is the Nash equilibrium for this game?
A. Coke and Pepsi will both choose a price of $1.25.
B.
Coke will choose a price of $1.25 and Pepsi will choose a
price of $0.65.
and Pepsi's
O C. Coke will choose a price of $0.65 and Pepsi will choose a
price of $1.25.
D. Coke and Pepsi will both choose a price of $0.65.
Price = $1.25
Pepsi
Price = $0.65
Price = $1.25 Price = $0.65
$800
Coke
$900
$800
$175
$175
$700
$900
$700](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa66cd2e8-ab09-4cfb-b5d6-ef04ed92ebc8%2F9dd0e0bc-cb8a-450e-88eb-a3f3854e8e13%2Fz29lfye_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a market with two firms, Coke and Pepsi, that produce soft
drinks. Both firms must choose whether to charge a high price
($1.25) or a low price ($0.65) for their soft drinks.
These price strategies with corresponding profits are depicted in the
payoff matrix to the right. Coke's profits are in red and Pepsi's are in
blue.
Coke's dominant strategy is to pick a price of
dominant strategy is to pick a price of $
What is the Nash equilibrium for this game?
A. Coke and Pepsi will both choose a price of $1.25.
B.
Coke will choose a price of $1.25 and Pepsi will choose a
price of $0.65.
and Pepsi's
O C. Coke will choose a price of $0.65 and Pepsi will choose a
price of $1.25.
D. Coke and Pepsi will both choose a price of $0.65.
Price = $1.25
Pepsi
Price = $0.65
Price = $1.25 Price = $0.65
$800
Coke
$900
$800
$175
$175
$700
$900
$700
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