What is the Nash equilibrium of this game? Recall that for each player you should find the best response to each of the opponents’ strategies and underline the associated payoff. Then look for a cell where both strategies are best responses to each other. This is a Nash equilibrium. (b) Does either firm have a dominate strategy (a strategy that is always a best response)?
Consider the following price game:
Firm 1 Firm 2
High Low
High 20, 20 12, 24
Low 24, 12 14, 14
Remark: In simultaneous move games (games with rows and columns) the
convention is to write the row player’s payoff first and the column player’s
payoff second.
(a) What is the Nash equilibrium of this game? Recall that for each player
you should find the best response to each of the opponents’ strategies and
underline the associated payoff. Then look for a cell where both strategies
are best responses to each other. This is a Nash equilibrium.
(b) Does either firm have a dominate strategy (a strategy that is always a
best response)?
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