Two Firms Are Competing in a Duopoly and Are Trying

question 175

Essay

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.

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