In a Duopoly Game,we Observe the Following Payouts

question 20

Multiple Choice

In a duopoly game,we observe the following payouts.If the two firms collude they each make an economic profit of $50,000.If one firm cheats,then that firm makes an economic profit of $60,000 and the other incurs an economics loss of $10,000.If both firms cheat,then they both make zero economic profit.What is the Nash equilibrium?

• A)Both firms cheat.
• B)Neither firm cheats.
• C)One firm cheats but we don't know which one.
• D)Only the larger firm cheats.
• E)Only the smaller firm cheats.

---

Definitions:

Doubled Production

A situation or outcome where the output or production of goods or services has increased by 100 percent.

State apparatus

The complex of institutions, bodies, and organizations through which a state exercises its power and authority.

Political economy

An interdisciplinary field that examines the relationship between politics and economics, focusing on how political institutions, the political environment, and the economic system influence each other.

Power mongering

The practice of seeking to acquire and maintain an excessive amount or concentration of power, often for selfish or corrupt purposes.