Question

Two firms must make pricing decisions without collusion. Profits resulting from their decision are given in...

Two firms must make pricing decisions without collusion. Profits resulting from their decision are given in the following table:

                                                                                      Firm 1

                                                                                  High              Low

                                                                     High     10,12    -2,18

                              Firm 2                           Low     16,3              2,5

Explain the Nash equilibrium. Does this game have dominant strategy equilibrium? Explain. Is this game a prisoner's dilemma? Explain. Is there an advantage in moving first? Explain. What is the cooperative solution?

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