Firm X and Firm Y Are the Only Two Internet

question 86

Essay

Firm X and firm Y are the only two Internet providers in a small town.The demand for Internet subscriptions is P = 60 - Q.Neither firm X nor firm Y has any fixed costs.The marginal cost of firm X is constant at $10,and the marginal cost of firm Y is constant at $20.Each firm can sell either 10 or 20 subscriptions,and they meet only once in this market.
(A)Create the payoff matrix.Show your calculations and explain verbally as necessary.
(B)Find the Nash equilibrium or equilibria.Explain verbally.
(C)If there are multiple equilibria,which equilibrium do you think is most likely to occur,and why?

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Definitions:

Freudian Psychoanalytic

A therapeutic approach and theory of personality developed by Sigmund Freud that emphasizes unconscious motivations and conflicts, especially as they originate in childhood.

Mania

A state or episode of euphoria or frenzied activity in which people may have an exaggerated belief that the world is theirs for the taking.

Motivational

Pertaining to motivation or being aimed at stimulating someone's desire to do something.

Behavioral

Relating to the actions or reactions of a person or animal in response to external or internal stimuli.