Two firms, A and B, must each choose either a low price or a high price for thei

Question

Two firms, A and B, must each choose either a low price or a high price for their product. The payoff matrix shows the profit each firm would make with the various price combinations. Profits are in millions of dollars, and Firm A's profit is on the left and Firm B's profit is on the right side of each cell. Firm B Low price High price Low price High price 5, 6 3, 8 8,4 7, 7 Firm A If the firms cannot cooperate with each other and must choose simultaneously, what price will they choose? O A. Firm A will choose the low price and Firm B will choose the high price. B. Both firms will choose the low price. ° C. Firm A will choose the high price and Firm B will choose the low price. 0 D. Both firms will choose the high price. If the firms could cooperate with each other, what price would they choose? 0 A. 0 B. C. 0 D. Firm A would choose the low price and Firm B would choose the high price. Both firms would choose the high price. Both firms would choose the low price. Firm A would choose the high price and Firm B would choose the low price.

Explanation / Answer

1- nash equilibrium is the strategy set in from which if one player tries to deviate gien the other payer doesnt move then the player who deviates will never gain,

so in non cooperate game here such set is (low price, low price)

so answer is B

2- if both firms can cooperate then its better to charge high prices and earn 7,7 as it mutually enefits both of them

so answer os B

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