Which Statement Most Nearly Describes a Nash Equilibrium Applied to Price

question 117

Multiple Choice

Which statement most nearly describes a Nash equilibrium applied to price competition?

• A) Two firms cooperate and set the price that maximizes joint profits.
• B) Each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price anyway.
• C) Given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level.
• D) One dominant firm sets the price, and the other firms take that price as if it were given by the market.

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