ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 10, Problem 3.9P
To determine
The dominant strategy for the firms in the duopoly market and establishing the equilibrium strategy combination and the Nash equilibrium for the market.
Concept Introduction:
Dominant Strategy- The strategy for a player for which he does better in terms of payoffs/profits irrespective of the strategy of the rival, is said to be his dominating strategy.
Nash Equilibrium- The strategy combination for the two players which is mutually agreed upon for higher returns such that no one player has an incentive to deviate from it unilaterally, is said to be a Nash Equilibrium.
| FORD SELLING PRICE → | $4,000 | $8,000 | $12,000 |
|---|---|---|---|
| CHEVROLET SELLING PRICE↓ | |||
| $4,000 | 8,8 | 12,6 | 14,2 |
| $8,000 | 6,12 | 10,10 | 12,6 |
| $12,000 | 2,14 | 6,12 | 7,7 |
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