Two firms are competing in a duopoly and are trying to decide which price to set.The two prices under consideration are a high monopoly price and a low competitive level.If both seller A and seller B chose the monopoly price,each will make $20 million of economic profit.However,if one picks the monopoly price while the other picks the competitive price,the high-price firm will lose $1 million while the low-price firm will make $32 million.If both sell at the competitive level,they both make zero economic profit.Complete the payoff matrix below and determine the Nash equilibrium.
Definitions:
Capital Contributions
The funds or assets initially invested in a business or partnership by its owners or partners.
Ratio
A relationship in numbers expressing the frequency with which one value encompasses or is encompassed by another.
Lowest Terms
The simplest form of a fraction when both the numerator and denominator cannot be any smaller while still being whole numbers.
Ratio
An arithmetic ratio that illustrates the frequency with which one number incorporates another, depicting how many times one value is contained within another.
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