Purchase Solution

Nash Equlibrium/Payoffs

Not what you're looking for?

Ask Custom Question

4. The table below shows the payoffs two competing firms, Cole and Martin, face in the decision to reduce their price or retain their current price.
Cole

Lower Price Retain Price

Martin Lower
Price Cole 70K Martin 80K Cole 40K
Martin 100K
Retain
Price Cole 100K
Martin 50K Cole 80K
Martin 90K

a. What will Cole's decision be and why?
b. What will Martin's decision be and why?

Attachments
Purchase this Solution

Solution Summary

The expert examines Nash equilibrium and payoffs for current prices.

Solution Preview

Cole's decision is to lower price, because he is better off doing so regardless of Martin's decision. Let us take a look,

1) if Martin plays "lower price", Cole gets 70K from lowering price while only 40K from retain ...

Purchase this Solution


Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.