Question
Consider 2 firms, Firm A and Firm B, both are property developers. Both firms have to decide whether to charge higher or lower price for
Consider 2 firms, Firm A and Firm B, both are property developers. Both firms have to decide whether to charge higher or lower price for their properties launched. If both firms charge higher price, Firm A will earn $20m while Firm B will earn $8.5m. If both firms charge lower price, Firm A will earn $25m while Firm B will earn $40m. If Firm A charges higher price while Firm B charges lower price, Firm A will earn $30m while Firm B will earn $6.5m. If Firm A charges lower price while Firm B charges higher price, Firm A will earn $7.5m while Firm B will earn $50m. Construct the payoff matrix for the earning of both firms, explain how did you solve for the Nash equilibrium and whether this is a prisoner's dilemma game.
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