Asked by Abo Yousef Khaleel on Jul 17, 2024
Verified
Does the Nash equilibrium yield maximum profit?
A) Yes,because they are each getting the maximum payoff
B) No,because they could do better by pricing high
C) Yes,because they are both making sales
D) No,because they both hate selling ice cream
Nash Equilibrium
A concept in game theory where no player can gain by unilaterally changing their strategy if the strategies of the others remain unchanged.
Maximum Profit
The highest level of profit that can be generated from operations under given conditions and constraints.
Pricing High
Setting the price of a product or service significantly above the cost of production or acquisition to achieve higher margins.
- Show a clear understanding of how efficiency and optimality influence outcomes in games.
Verified Answer
GS
Gessica SementilliJul 17, 2024
Final Answer :
B
Explanation :
The Nash equilibrium in this game is for both players to price low, resulting in a payoff of 5 each. However, if both players agreed to price high, they would each earn a payoff of 6. Therefore, they could do better by jointly deviating from the Nash equilibrium, making choice B the best option.
Learning Objectives
- Show a clear understanding of how efficiency and optimality influence outcomes in games.