Table 17-19
Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
-Refer to Table 17-19. What is the Nash Equilibrium of this price-setting game?
A)Grocery store 1: Low price Grocery store 2: Low price
B)Grocery store 1: Low price Grocery store 2: High price
C)Grocery store 1: High price Grocery store 2: How price
D)Grocery store 1: High price Grocery store 2: High price

Question

Table 17-19
Consider a small town that has two grocery stores from which residents can choose to buy a loaf of bread. The store owners each must make a decision to set a high bread price or a low bread price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2). 
-Refer to Table 17-19. What is the Nash Equilibrium of this price-setting game?
A)Grocery store 1: Low price Grocery store 2: Low price 
B)Grocery store 1: Low price Grocery store 2: High price 
C)Grocery store 1: High price Grocery store 2: How price 
D)Grocery store 1: High price Grocery store 2: High price

Quizplus · Accepted Answer

The Nash Equilibrium is the combination of strategies that maximizes the payoff for each player, given the strategies of the other players. In this case, the Nash Equilibrium is for both grocery stores to set a low price. This is because if one grocery store sets a high price, the other grocery store will set a low price and take all of the customers.

Table 17-19 Consider a Small Town That Has Two Grocery Stores from Stores