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.

---

Definitions:

Factor Analysis

A statistical method used to identify underlying relationships among variables by grouping them into factors based on their correlations.

Simplifies Data

The process of making complex data more understandable and accessible by reducing complexity or focusing on important details.

Correlation

A statistical measure that describes the extent to which two variables change together, but doesn't necessarily indicate causation.

ANCOVA

Short for Analysis of Covariance, a statistical technique that adjusts the means of dependent variables for one or more covariates before comparing the means of different groups.