Two firms are considering going out of business and selling their assets. Each c

Question

Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. Firm A Stays in business Sells business Firm B Stays in business A gains $9 million B gains $7million A gains $7 million B gains $15 million Sells business A gains $15 million B gains $8 million A gains $1 million B gains $3 million Refer to Table 17-24. What is the Nash equilibrium? Question options: 1) B stays in business, A sells 2) Both A and B sell 3) A stays in business, B sells 4) A and B both stay in business

Explanation / Answer

  2) Both A and B sell

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