Question $13$

$1$ pts

Walmart

$\backslash$table$[[$Target$,$High Price,High Price,Low Price$],[$$$10,000,$ $$10,000,$$$5,000,$ $$14,000],[$Low Price,$$14,000,$ $$5,000,$$$7,000,$ $$7,000]]$

The table above shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation $4.$ At the start of the game each firm charges a low price and each earns a profit of $$7,000.$ Is the current strategy in which each firm charges the low price and earns a profit of $$7,000$ a Nash equilibrium? If not, why and what is the Nash equilibrium?

Yes, the current situation is a Nash equilibrium.

No$,$ it is not a Nash equilibrium because each firm can do better by charging the high price. The Nash equilibrium occurs when each firm charges the high price and earns a profit of $$10,000.$

No$,$ the current situation is not a Nash equilibrium; it is a dominant strategy equilibrium. There is no Nash equilibrium in this game.

No$,$ the current situation is not a Nash equilibrium. The Nash equilibrium for each firm is to have the other charge a high price and for the firm in question charge a low price.