-Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has
A) no Nash equilibrium.
B) a Nash equilibrium: Sears keeps its prices high and Wal-Mart lowers its prices.
C) a Nash equilibrium: both Sears and Wal-Mart keep prices high.
D) a Nash equilibrium: both Sears and Wal-Mart lower prices.

Question

-Refer to the payoffs in the table above. Sears and Wal-Mart must decide whether to lower their prices based on the profits shown in the table. This game has
A) no Nash equilibrium. 
B) a Nash equilibrium: Sears keeps its prices high and Wal-Mart lowers its prices. 
C) a Nash equilibrium: both Sears and Wal-Mart keep prices high. 
D) a Nash equilibrium: both Sears and Wal-Mart lower prices.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the strategy of the other player. If both Sears and Wal-Mart lower prices, neither can increase their payoff by unilaterally changing their strategy, making it a Nash equilibrium.

-Refer to the Payoffs in the Table Above