Consider the Following Payoff Matrix for a Game in Which

question 85

Multiple Choice

Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model:

Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut) . The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash equilibrium for this game?

• A) Both firms cut prices.
• B) A cuts and B colludes.
• C) B cuts and A colludes.
• D) Both firms collude.

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