reach a Nash equilibrium? What will be the price of water once Randy and Alex re

Question

reach a Nash equilibrium?

What will be the price of water once Randy and Alex reach a Nash equilibrium?

_____________ $_______

iii. How much profit will each of them earn?

$_____________

d. (3 points) Until last month, Randy and Alex equally shared and produced monopoly quantities and charged monopoly price [as in question a]. Suppose the town enacts new antitrust laws that prohibit Randy and Alex from operating as a monopoly. Here is their payoff matrix: Randy Q-300 Q-400 Randy's profits Randy's profit = $10,000 $9,000 Q-300 Alex's profit = $9,000 Alex's profit = $7,500 Alex Randy's profit = $7,500 Randy's profit = $8,000 Q-400 | Alex's profit Alex's profit = $8,000 $10,000 i. How many total gallons of water will be produced and sold once Randy and Alex reach a Nash equilibrium?

Explanation / Answer

A Nash equilibrium is an action profile a with the property that no player i can do better by choosing an action different from ai , given that every other player j adheres to aj .

now as per the given defination we can say that the nash equilibrium is reached when both of them produces 400, so total quantity produced is 800

now we can see that when both of them sell 400 the profits earned by both is 8000 per company

now, prices basically depends on the fact if there is some cost involved which isnt mentioned in this question,

if there is no cost then price charged is 8000/400 = 20 per gallon

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