Suppose There Are Only Two Firms in an Industry

question 79

Multiple Choice

Suppose there are only two firms in an industry. If they each set a high price, they each earn $5000. If they each set a low price, they each earn $2500. If one firm sets a low price while the other sets a high price, the low- price firm earns $7000 while the high- price firm earns $1000. Does a prisoners' dilemma exist?

• A) no, the Nash equilibrium does not maximize the individual payoff
• B) it cannot be determined from the information provided
• C) no, the Nash equilibrium does not maximize the joint payoff
• D) yes, the Nash equilibrium does not maximize the joint payoff
• E) yes, because there is always a prisoner's dilemma in game theory

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Definitions:

Data Analytics

The process of examining datasets to draw conclusions about the information they contain, using specialized systems and software.

Data Mining

The process of extracting useful patterns, correlations, and insights from large sets of data using statistical and machine learning techniques.

Salary Differentials

The variations in salary for similar jobs within the same sector or across different sectors, often influenced by geographical location, experience, education level, and the nature of the work.

Competitiveness

The ability of a company, region, or country to produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens.