-Refer to the Payoffs in the Table Above

question 226

Multiple Choice

-Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has

• A) no Nash equilibrium.
• B) a Nash equilibrium: Sears keeps its prices high and Wal-Mart lowers its prices.
• C) a Nash equilibrium: both Sears and Wal-Mart keep prices high.
• D) a Nash equilibrium: both Sears and Wal-Mart lower prices.

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Definitions:

Nominal Exchange Rate

The rate at which one country's currency can be exchanged for another country's currency.

Real Exchange Rate

An exchange rate that has been adjusted for the relative purchasing power of the two currencies, reflecting the quantity of goods and services one currency can buy in another country.

Domestic Prices

The prices of goods and services within a country's borders, influenced by local factors like production costs, taxes, and supply and demand.

Trade Deficit

A situation in which a country's imports exceed its exports, leading to more money flowing out of the country than coming in.