The table below shows the payoffs for two firms competing on price (a Bertrand duopoly). Firm A and Firm B can each choose to raise their prices, or to keep their prices low. A's Strategy Raise Price a. Table 14.4 B's Strategy Raise Price A's profit $6,000 B's profit $6,000 Don't A's profit $30,000 Raise B's profit $20,000 Based on the pay-off table above, what is the Nash equilibrium outcome? Firm A: Don't Raise Price Firm B: Don't Raise Price b. Firm A: Raise Price Firm B: Don't Raise Price Don't Raise Price A's profit $20,000 B's profit $30,000 c. Firm A: Don't Raise Price Firm B: Raise Price d. More than one answer is correct A's profit $10,000 B's profit $10,000

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
The table below shows the payoffs for two firms competing on price (a Bertrand duopoly).
Firm A and Firm B can each choose to raise their prices, or to keep their prices low.
A's Strategy
Raise
Price
Table 14.4
B's Strategy
Raise Price
A's profit $6,000
B's profit $6,000
C.
Don't
A's profit $30,000
Raise B's profit $20,000
a. Firm A: Don't Raise Price
Firm B: Don't Raise Price
Based on the pay-off table above, what is the Nash equilibrium outcome?
b. Firm A: Raise Price
Firm B: Don't Raise Price
Firm A: Don't Raise Price
Firm B: Raise Price
d. More than one answer is correct
Don't Raise Price
A's profit $20,000
B's profit $30,000
A's profit $10,000
B's profit $10,000
Transcribed Image Text:The table below shows the payoffs for two firms competing on price (a Bertrand duopoly). Firm A and Firm B can each choose to raise their prices, or to keep their prices low. A's Strategy Raise Price Table 14.4 B's Strategy Raise Price A's profit $6,000 B's profit $6,000 C. Don't A's profit $30,000 Raise B's profit $20,000 a. Firm A: Don't Raise Price Firm B: Don't Raise Price Based on the pay-off table above, what is the Nash equilibrium outcome? b. Firm A: Raise Price Firm B: Don't Raise Price Firm A: Don't Raise Price Firm B: Raise Price d. More than one answer is correct Don't Raise Price A's profit $20,000 B's profit $30,000 A's profit $10,000 B's profit $10,000
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Prisoner's Dilemma
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education