Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market II
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The noncooperative equilibrium in the cable TV market occurs when:
A) CableNorth sets a high price and earns $80,000 per month and CableSouth sets a low price and earns $130,000 per month.
B) CableNorth sets a low price and earns $130,000 per month and CableSouth sets a high price and earns $80,000 per month.
C) both firms set a low price and each earns $90,000 per month.
D) both firms set a high price and each earns $100,000 per month.

Question

Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market II 
-(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in Cable TV Market II. The noncooperative equilibrium in the cable TV market occurs when:
A) CableNorth sets a high price and earns $80,000 per month and CableSouth sets a low price and earns $130,000 per month. 
B) CableNorth sets a low price and earns $130,000 per month and CableSouth sets a high price and earns $80,000 per month. 
C) both firms set a low price and each earns $90,000 per month. 
D) both firms set a high price and each earns $100,000 per month.

Quizplus · Accepted Answer

In a noncooperative equilibrium, both firms choose strategies that maximize their own payoff given the strategy of the other. When both firms set a low price, they each earn $90,000, which is the Nash equilibrium in this scenario.

Use the Following to Answer Questions