Suppose that Thierry and Abdul are duopolists. Thierry is producing 700 units of output, and Abdul is producing 500 units of output. When Abdul produces 500 units, Thierry maximizes profit by producing 700 units. When Thierry produces 700 units of output, Abdul maximizes profit by producing 500 units. Thierry and Abdul are
A)pricing at the minimum of marginal cost.
B)in a competitive market.
C)at a Nash equilibrium.
D)engaging in mark-up pricing.

Question

Quizplus · Accepted Answer

Thierry and Abdul are at a Nash equilibrium because neither player can increase their profits by unilaterally changing their output level, given the other player's output level. Both are producing at their profit-maximizing output levels, given the other's output level. This is a stable outcome and represents the best response of each player to the other's action.

Suppose That Thierry and Abdul Are Duopolists