Suppose two companies, Apples and Dell, are a competing duopoly. If both companies charge the high price, they each earn $700 million in economic profit. If both companies charge the low price, they each earn $500 million in economic profit. If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit. 1. What is the Nash equilibrium? Select all possible answers from the answer list.  2. Thinking back to your answer for the Nash equilibrium, can firms do better than the outcome you identified? Explain.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Suppose two companies, Apples and Dell, are a competing duopoly.

  • If both companies charge the high price, they each earn $700 million in economic profit.
  • If both companies charge the low price, they each earn $500 million in economic profit.
  • If one company charges a high price and the other a low price, the company charging the higher price earns $450 million in economic profit and the company charging the lower price earns $800 million in economic profit.

1. What is the Nash equilibrium? Select all possible answers from the answer list. 

2. Thinking back to your answer for the Nash equilibrium, can firms do better than the outcome you identified? Explain.  

high price, high price
high price, low price.
low price, low price
700, 700
no Nash equlibrium
450, 800
low price, high price
500, 500
Transcribed Image Text:high price, high price high price, low price. low price, low price 700, 700 no Nash equlibrium 450, 800 low price, high price 500, 500
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