Bud and Wise are the only two producers of aniseed? beer, a New Age product desi

Question

Bud and Wise are the only two producers of aniseed? beer, a New Age product designed to displace root beer.

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The payoff matrix shows the game that Bud and Wise play.

?>>> The numbers in the table are given in dollars.

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The Nash equilibrium is that? ______.

A. Bud and Wise both limit production to? 10,000 gallons

B. Wise produces? 20,000 gallons and Bud produces? 10,000 gallons

D. both Bud and Wise produce? 20,000 gallons

Bud (red squares) 20,000 gallons 10,000 gallons -50,000 20,000 gallons 300,000 Wise (blue squares) 300,000 100,000 10,000 gallons -50,000 100,000

Explanation / Answer

As we know nash equilibrium is a concept where no player deviates from their strategy, as there is no incentive for choosing any other strategy after knowing the strategy for other player.

So here there is a nash equilibrium at a point where Bud and Wise both limit production to 10,000 gallons.

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