In a Duopoly Game We Observe the Following Payouts: If

question 163

Multiple Choice

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

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