In a Shopping Mall there are two tobacco stores. They each set a high price for their cigars, they each earn $50,000 a month. If they each set a low price, they each earn $25,000 a month. If one store sets a low price while the other sets a high price, the low- price store earns $70,000 while the high- price store earns $10. In this game:
A)there is no Nash equilibrium.
B)there are two Nash equilibria.
C)there is only one Nash equilibrium.
D)any combination is a Nash equilibrium.

Question

Quizplus · Accepted Answer

There is only one Nash equilibrium where both stores set a low price, as neither store can benefit by unilaterally changing their strategy.

In a Shopping Mall There Are Two Tobacco Stores