The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown below. The payoffs are thousands of dollars of economic profit. In the Nash equilibrium, A). Firm A and Firm B are both making $80,000 in economic profit. B). Firm A and Firm B are both making $75,000 in economic profit. C). Firm A is making $80,000 and Firm B is making $75,000 in economic profit. D). Firm A and Firm B are both making $60,000 in economic profit. 1.25Firm A's StrategiesPrice = S5Price = $10S60$54$60$80Firm B'sum,Price = $5StrategiesS80$75$54S75Price = $10

Game theory is concerned with the choice of an optimal strategy in conflict situations. The Nash…

Answered: The only two firms in a market are…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 9PA

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The only two firms in a market are trying to decide what price to charge. The payoff matrix for this duopoly game is shown below. The payoffs are thousands of dollars of economic profit. In the Nash equilibrium,


A). Firm A and Firm B are both making $80,000 in economic profit.
		B). Firm A and Firm B are both making $75,000 in economic profit.
		C). Firm A is making $80,000 and Firm B is making $75,000 in economic profit.
		D). Firm A and Firm B are both making $60,000 in economic profit.

1.25
Firm A's Strategies
Price = S5
Price = $10
S60
$54
$60
$80
Firm B's
um,
Price = $5
Strategies
S80
$75
$54
S75
Price = $10

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