Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. The figure shows the payoff matrix for this game.
What is the Nash equilibrium in this game?
A.
There is no Nash equilibrium.
B.
Alpha offers a student discount but Beta does not.
C.
Both Alpha and Beta offer a student discount.
D.
Beta offers a student discount but Alpha does not.
Homework Answers
The Nash equilibrium is a point from where none of the players will deviate unilaterally or they will be facing a loss, here the Nash equilibirum is both the players offering a discount.
The answer is "C".
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