Suppose Chord are Fredler are two automobile manufacturers, each of whom is deciding whether to launch a new model of car or increase the production of their existing models.The payoffs which each receive are provided in the matrix given below.

-Refer to Table .Which of the following strategic choices represents the Nash equilibrium?
A)Chord increases the production of existing cars and Fredler launches a new model of car; Chord launches a new model of car and Fredler increases production.
B)Both Chord and Fredler launch new models of cars.
C)Both Chord and Fredler increase production of their existing cars.
D)Chord increases production and Fredler decides to launch a new model of car.

Question

Suppose Chord are Fredler are two automobile manufacturers, each of whom is deciding whether to launch a new model of car or increase the production of their existing models.The payoffs which each receive are provided in the matrix given below.

-Refer to Table .Which of the following strategic choices represents the Nash equilibrium?

-Refer to Table .Which of the following strategic choices represents the Nash equilibrium?
A)Chord increases the production of existing cars and Fredler launches a new model of car; Chord launches a new model of car and Fredler increases production. 
B)Both Chord and Fredler launch new models of cars. 
C)Both Chord and Fredler increase production of their existing cars. 
D)Chord increases production and Fredler decides to launch a new model of car.

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the other player's strategy. Choice A describes a situation where each company's decision is optimal in response to the other's decision, indicating a Nash equilibrium.

Suppose Chord Are Fredler Are Two Automobile Manufacturers, Each of Whom