Consider the Following Payoff Matrix for a Game in Which

question 114

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) Both firms collude.
• C) There are two Nash equilibria: A cuts and B colludes, and A colludes and B cuts.
• D) There are no Nash equilibria in this game.

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