Answer to Question #67442 in Economics for saad A. aljibreen

Question

In a simultaneous move game, if both charge the low price (LP) they each earn $5K. If both charge the high price (HP) they each earn $10K. If they charge different prices, the one playing LP earns $15K and the other earns $1K. If the businesses play indefinitely, then a Nash Equilibrium is
a. for one firm to charge a HP forever
b. for your firm charge a LP when the other firm does
c. for each firm to charge HP until the rival does not, and then to charge LP
d. for each firm to charge LP until the rival does not, and then to charge a HP forever

A common solution to a coordination game is
a. to issue threats before the game starts
b. to change the payoffs
c. for one player to accommodate the other
d. for one player to go first

Answer 1

If the businesses play indefinitely, then a Nash Equilibrium is:
d. for each firm to charge LP until the rival does not, and then to charge a HP forever

A common solution to a coordination game is:
c. for one player to accommodate the other.