Price agreement Break the agreement Perlis Price agreement (3,2) A (-1,3) B Break the (4,-1) C (0,0) agreement Figure 12 Payoff matrix for two firms in oligopoly Two firms, Perlis and Dizz, produce washing powder in a market characterised by oligopoly. Illegally, the firms have agreed to collude so that they charge broadly the same price for their product. Each firm could increase its own share of the market and profit by breaking the agreement, but if they both do this they would both be worse off. This situation may be characterised as a game and Figure 12 shows the payoff matrix for this game. Figure 12 also labels each cell in the payoff matrix with a letter, A, B, C or D. Based on the information in the payoff matrix, decide which cells, if any, correspond to a Nash equilibrium. Select one answer. Select one: O A There is no Nash equilibrium O A and D O D

Price agreement Break the agreement Perlis Price agreement (3,2) A (-1,3) B Break the (4,-1) C (0,0) agreement Figure 12 Payoff matrix for two firms in oligopoly Two firms, Perlis and Dizz, produce washing powder in a market characterised by oligopoly. Illegally, the firms have agreed to collude so that they charge broadly the same price for their product. Each firm could increase its own share of the market and profit by breaking the agreement, but if they both do this they would both be worse off. This situation may be characterised as a game and Figure 12 shows the payoff matrix for this game. Figure 12 also labels each cell in the payoff matrix with a letter, A, B, C or D. Based on the information in the payoff matrix, decide which cells, if any, correspond to a Nash equilibrium. Select one answer. Select one: O A There is no Nash equilibrium O A and D O D

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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