The payoff matrix of economic profits below displays the possible outcomes for B

Question

The payoff matrix of economic profits below displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result,

J: $6,000

B: $10,000

J: $3,000

J: $12,000

J: $10,000

1. What is the Nash equilibrium?

     2. If Bob and Jane colluded, what would be their economic profits?

Jane Advertise Don't Advertise Advertise

J: $6,000

B: $10,000

J: $3,000

B: $20,000 Bob Dont't Advertise

J: $12,000

B: $5,000

J: $10,000

B: $15,000 1.

Explanation / Answer

1. Nash equilibrium is a situation in the market where either of the parties cannot gain with unilateral action without change in others strategies, Here action of others will change with your action.

2. If bob and jane collude

Jane would make 10,000

Bob would make 15,000

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