-The Only Two Firms in a Market Are Trying to Decide

question 159

Multiple Choice

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.Which of the following statements is correct?

• A) If the firms play this game repeatedly, one would end up charging $20 and the other $10.
• B) If the firms cooperate, both could make $55,000 in economic profit.
• C) The Nash equilibrium in this game is for both firms to set P = $20 because that maximizes their combined profit.
• D) Firm B's strategy is to always set P = $20 because that gives Firm B the highest possible profit.
• E) If Firm B sets P = $20, then Firm A will maximize its profit by setting its P = $20.

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Definitions:

Low Power Distance

A societal characteristic where individuals perceive little difference in power and status among members, promoting equality and challenging authority.

Feedback

The information and reactions received about an individual's performance or about the results of a business activity, used as a basis for improvement.

Managing Cultural Differences

The practice of acknowledging and adapting to cultural variations in a global business environment.

Recognition

The acknowledgment or appreciation of someone's status, achievements, or rights.