In a Duopoly Game We Observe the Following Payoffs: If

question 93

Multiple Choice

In a duopoly game we observe the following payoffs: if the two firms collude they will each earn
$50,000. If one firm cheats then it 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) Only one firm will cheat.
• B) Neither firm will cheat.
• C) Both firms cheat.
• D) It is impossible to say.

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Definitions:

Back Orders

Orders for goods or services that cannot be filled at the current time due to lack of supply.

Inventory Holding Cost

Expenses incurred from storing unsold goods or materials, including storage costs, insurance, deterioration, and obsolescence.

Overtime Cost

The additional expenses incurred by a company when workers work beyond their normal working hours, usually at a higher pay rate.

Stockout Cost

The cost incurred when inventory is not sufficient to meet demand, potentially leading to lost sales and customer dissatisfaction.