Table 16-4 In the Following Duopoly Game, the Two Firms Can Either

question 106

Multiple Choice

Table 16-4
In the following duopoly game, the two firms can either set the price of their product high or low. In this market, customers are very price sensitive: when one firm sets a low price it steals the majority of customers from its competitor. The game is represented in the table below.

-Refer to Table 16-4. The Nash-equilibrium in this market is:

• A) firm A gets $500, firm B gets $500
• B) firm A gets $300, firm B gets $600
• C) firm A gets $600, firm B gets $300
• D) firm A gets $400, firm B gets $400

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Definitions:

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividend payments, indicating how quickly the dividend payments have increased over a specific period of time.

Required Returns

The smallest yield an investor predicts to receive from investing in a particular venture or asset.

Constant

A value that does not change.

Present Value

The present financial value of a sum of money to be received in the future or a series of cash flows, considering a specific return rate.