There are only two gasoline stations in a small isolated town. If they each set a high price, they each earn $50. If they each set a low price, they each earn $25. If one firm sets a low price while the other sets a high price, the low-price firm earns $70 while the high- price firm earns $10. If the two firms set price independently and simultaneously, and the decision is just made once, what outcome will result?

1. Both will set a high price
2. Both will set a low price.
3. One firm sets a high price; the other sets a low price.
4. There is not enough information to tell.

QUESTION

There are only two gasoline stations in a small isolated town. If they each set a high price, they each earn $50. If they each set a low price, they each earn $25. If one firm sets a low price while the other sets a high price, the low-price firm earns $70 while the high- price firm earns $10. Which of the following is a Nash equilibrium?

1. Both set a low price
2. Both set a high price
3. One firm sets a low price; the other high
4. All of the above are Nash equilibria

QUESTION

There are only two gasoline stations in a small isolated town. If they each set a high price, they each earn $50. If they each set a low price, they each earn $25. If one firm sets a low price while the other firm sets a high price, the low-price firm earns $70 while the high-price firm earns $10.

1. There is only one Nash equilibrium
2. There is more than one Nash equilibrium.
3. There is on Nash equilibrium.

QUESTION

There are only two gasoline stations in a small isolated town. If they each set a high price, they each earn $50. If they each set a low price, they each earn $25. If one firm seta a low price and the other firm sets a high price, the low-price firm earns $70 while the high-price firm earns $10. If they two firms collude, what will they do?

1. They both set high price.
2. They both set low price.
3. One firm sets a high price and the other sets a low price.
4. Not sure what will happen.

1 points

QUESTION

There are only two gasoline stations in a small isolated town. If they each set a high price, they each earn $50. If they both set a low price, they each earn $25. If one firm sets a low price and the other sets a high price, the low-price firm earns $70 and the high-price firm earns $10. Does a prisoners' delimma exist?

1. Yes
2. No
3. Not sure