QUESTION 29 Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Firm B colludes Firm B cuts Firm A cuts 6,6 24,8 Firm A 8,24 12,12 colludes Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game? A. Both firms cut prices. B. There are two Nash equilibria: A cuts and B colludes, and A colludes and B cuts. C. Both firms collude. D. There are no Nash equilibria in this game.

QUESTION 29 Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Firm B colludes Firm B cuts Firm A cuts 6,6 24,8 Firm A 8,24 12,12 colludes Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game? A. Both firms cut prices. B. There are two Nash equilibria: A cuts and B colludes, and A colludes and B cuts. C. Both firms collude. D. There are no Nash equilibria in this game.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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