In a Duopoly Game We Observe the Following Payouts: If

question 163

Multiple Choice

In a duopoly game we observe the following payouts: if the two firms collude they will each earn $50,000. If one firm cheats then he earns $60,000 and the other firm earns -$10,000. If both firms cheat then they each earn zero economic profit. In this game what is the Nash equilibrium?

• A) Both firms cheat.
• B) Only one firm will cheat.
• C) Neither firm will cheat.
• D) It is impossible to say.

---

Definitions:

Administrative Law Judge

A federal or state official who conducts hearings and makes decisions on disputes involving administrative law.

Federal Trade Commission

An independent agency of the United States government, established in 1914 to prevent anticompetitive, deceptive, and unfair business practices.

Administrative Dispute Resolution Act

U.S. legislation that promotes the use of alternative dispute resolution processes, such as arbitration and mediation, in the administrative process of federal agencies.

Arbitration

A method of resolving disputes outside the courts, where the parties to a dispute refer it to one or more arbitrators by whose decision (the "award") they agree to be bound.