Refer to the Accompanying Matrix

question 10

Multiple Choice

Refer to the accompanying matrix.Which of the following is a Nash equilibrium?

• A) Company A chooses Strategy 1 and Company B chooses Strategy 1.
• B) Company A chooses Strategy 1 and Company B chooses Strategy 2.
• C) Company A chooses Strategy 2 and Company B chooses Strategy 2.
• D) Company A chooses Strategy 2 and Company B chooses Strategy 1.
• E) None of the above.

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Definitions:

Invisible Hand

A term coined by Adam Smith to describe the self-regulating nature of the marketplace, where individual self-interests unintentionally benefit society.

Fairness

The quality of making judgments that are free from discrimination, dishonesty, or injustice.

Ultimatum Game

A game in economic experiments where one player proposes how to divide a sum of money with another, who can accept or decline the offer, with both getting nothing if declined.

Dictator Game

An experimental economics game that measures how fairly individuals allocate resources when they have complete control over distribution.