Business, 08.05.2021 01:00 dbhuggybearow6jng

Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the cost of a crucial input used in producing these goods has increased. As a result, both of the firms are considering increasing the price of the good to $6. If the firms do not raise their prices at the same time, the firm that raises the price stands to lose market share. The payoff matrix shows their respective payoffs on the basis of the prices charged by each. Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Firm 2
price $5 price $6
50 100
Firm 1 price-$5 50 0
price $6 0 40
100 40
Refer to the scenario above. Which of the following is true?
A. The dominant strategy equilibrium is the Nash equilibrium.
B. This game does not have a Nash equilibrium.
C. Nash equilibrium occurs if Firm 1 charges a price of $5 and Firm 2 charges a price of $6.
D. Nash equilibrium occurs if Fim 1 charges $6 and Firm 2 charges $5.

Answers: 3

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Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the...

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