Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B).
-Refer to Table 17-18. The Nash equilibrium for this game is
A)10 units of output for Firm A and 10 units of output for Firm B.
B)10 units of output for Firm A and 12 units of output for Firm B.
C)12 units of output for Firm A and 10 units of output for Firm B.
D)12 units of output for Firm A and 12 units of output for Firm B.

Question

Table 17-18
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B). 
-Refer to Table 17-18. The Nash equilibrium for this game is
A)10 units of output for Firm A and 10 units of output for Firm B. 
B)10 units of output for Firm A and 12 units of output for Firm B. 
C)12 units of output for Firm A and 10 units of output for Firm B. 
D)12 units of output for Firm A and 12 units of output for Firm B.

Quizplus · Accepted Answer

The Nash equilibrium is the combination of output levels at which neither firm has an incentive to deviate from its strategy given the other firm's strategy. In this case, both firms have a dominant strategy of producing 12 units of output, regardless of what the other firm chooses. Therefore, the Nash equilibrium is for both firms to produce 12 units of output, resulting in (240, 240) profits for both firms.

Table 17-18 This Table Shows a Game Played Between Two Firms, Firm