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

question 71

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 dominant strategy for the firms are:

• A) firm A sets low price, firm B sets low price
• B) firm A sets low price, firm B sets high price
• C) firm A sets high price, firm B sets low price
• D) firm A sets high price, firm B sets high price

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Definitions:

Microeconomics

The branch of economics that focuses on how human behavior affects the conduct of affairs within narrowly defined units, such as individual households or business firms.

Aggregate Markets

Aggregate markets are large-scale markets that collectively encompass all buyers and sellers in an economy, dealing with the overall demand and supply rather than with individual products.

Postulate Of Economics

Fundamental assumptions that serve as the foundation for economic theories and models, such as rational behavior and market efficiency.

Incentives

Factors, either monetary or non-monetary, that motivate individuals or businesses to act in a certain way.