Two Firms Are Selling the Same Product

question 50

Multiple Choice

Two firms are selling the same product. Each has a choice of setting a high price or a low price. If they both set high prices, they make $150 each. If they both set low prices, they each make $125. If one sets a low price and the other sets a high price, then the player with the low price makes $200, while the player with the high price makes $100. The Nash equilibrium of this game is:

• A)one to set high price and the other to set low price.
• B)there does not exist a Pure Strategy Nash Equilibrium for this game
• C)both choosing high price.
• D)both choosing low price.

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Definitions:

Performance Evaluation

The process of assessing the performance of an individual, group, or entity against established objectives or criteria.

Operating Departments

Departments in a company directly involved in its core business activities, contributing to the production of its goods or services.

Fixed Element

A cost that does not change in total with changes in the volume of activity, remaining constant regardless of changes in levels of output or sales.

Power Costs

The expenses associated with the electricity used by a business for its operations.