Use the following case from question
Two ice cream trucks A&B are playing a simultaneous pricing game.If one of them prices low,he gets all the customers,a payoff of 12,while other gets zero.If both price high they each get a payoff of 6 and if both price low,they get a payoff of 5.
-What is the Nash equilibrium of this game?
A)Both the vendors price high
B)Both the vendors price low
C)Vendor A prices high,vendor B prices low
D)Vendor B prices high,vendor A prices low

Question

​Use the following case from question
Two ice cream trucks A&B are playing a simultaneous pricing game.If one of them prices low,he gets all the customers,a payoff of 12,while other gets zero.If both price high they each get a payoff of 6 and if both price low,they get a payoff of 5.
-​What is the Nash equilibrium of this game?
A)​Both the vendors price high
B)Both the vendors price low
C)Vendor A prices high,vendor B prices low
D)​Vendor B prices high,vendor A prices low

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. Pricing low for both vendors is a Nash equilibrium because if one vendor deviates and prices high, they get nothing (0) while the other gets all the customers (12). However, if both price low, they each get a payoff of 5, which is better than getting nothing. Thus, neither has an incentive to unilaterally change their strategy from pricing low, making it a Nash equilibrium.

​Use the Following Case from Question

Use the Following Case from Question