Two companies have to choose their prices at the same time, at either high (pH) or low (pL) levels. If both choose high (pH), they will share the monopoly profits of 50 thousand euros. Otherwise, 40 thousand euros will be distributed. If Company 1 chooses high (pH) and Company 2 low (pL), then it will receive zero profits and its opponent will have profits equal to 35 thousand euros. The opposite will happen if firm 1 chooses low (pL) and the other firm high (pH). The Nash balance of the game is formed in the pair of strategies а) рH, рH b) pH, pL c) pL, pL d) pL, pH

Two companies have to choose their prices at the same time, at either high (pH) or low (pL) levels. If both choose high (pH), they will share the monopoly profits of 50 thousand euros. Otherwise, 40 thousand euros will be distributed. If Company 1 chooses high (pH) and Company 2 low (pL), then it will receive zero profits and its opponent will have profits equal to 35 thousand euros. The opposite will happen if firm 1 chooses low (pL) and the other firm high (pH). The Nash balance of the game is formed in the pair of strategies а) рH, рH b) pH, pL c) pL, pL d) pL, pH

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 18CTQ: When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that...

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