Two cocaine producers are considering whether to form a cartel. They have two actions: either make prices high (H), or keep them low (L). If they both agree to form a cartel, agreeing to keep prices high (H), then they can make profits of $10 million each. If one producer keeps prices high (H), while the other makes them low (L), then the former makes a profit of $0, while the latter makes a profit of $15 million. If they both have low prices, then they each make $5 million. Depict this situation in a payoff matrix. What is the Nash equilibrium?

Answer rating: 100% (QA)

To depict the situation in a payoff matrix we can use the following format Producer 2 H L Producer 1 ... View the full answer