Consider a market with two firms, Coke and Pepsi, that produce softdrinks. Both firms must choose whether to charge a high price($1.25) or a low price ($0.65) for their soft drinks.These price strategies with corresponding profits are depicted in thepayoff matrix to the right. Coke's profits are in red and Pepsi's are inblue.Coke's dominant strategy is to pick a price ofdominant strategy is to pick a price of $What is the Nash equilibrium for this game?A. Coke and Pepsi will both choose a price of $1.25.B.Coke will choose a price of $1.25 and Pepsi will choose aprice of $0.65.and Pepsi'sO C. Coke will choose a price of $0.65 and Pepsi will choose aprice of $1.25.D. Coke and Pepsi will both choose a price of $0.65.Price = $1.25PepsiPrice = $0.65Price = $1.25 Price = $0.65$800Coke$900$800$175$175$700$900$700

Consider a market with two firms, Coke and Pepsi. They produce soft drinks. Both firms must choose…

Answered: Consider a market with two firms, Coke…

Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.65) for their soft drinks.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

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