Question

Consider a market with two​ firms, Krispy Kreme Doughnuts​ (KK) and​ Dunkin' Donuts​ (DD), that produce donuts. Both firms must choose whether to charge a high price ​($1.001.00​) or a low price ​($0.650.65​) for their donuts. These price strategies with corresponding profits are illustrated in the payoff matrix to the right. Krispy​ Kreme's profits are in red and​ Dunkin' Donuts' are in blue. Krispy​ Kreme's dominant strategy is to pick a price of ▼ $0.65 $1.00 ​, and​ Dunkin' Donuts' dominant strategy is to pick a price of ▼ $1.00 $0.65 . What is the Nash equilibrium for this​ game? A. Krispy Kreme and​ Dunkin' Donuts will both choose a price of ​$1.001.00. B. The game has no Nash equilibrium. C. Krispy Kreme will choose a price of ​$0.650.65 and​ Dunkin' Donuts will choose a price of ​$1.001.00. D. Krispy Kreme and​ Dunkin' Donuts will both choose a price of ​$0.650.65. E. Krispy Kreme will choose a price of ​$1.001.00 and​ Dunkin' Donuts will choose a price of ​$0.650.65.

Answer 1

Answer:. Krispy Kreme and​ Dunkin' Donuts will both choose a price of ​$1.001.00.

Explanation: since krispy kreme's profit will be in d red if they start with $0.650.65, therefore they will start with$1.001 and since d profit margin of dunkin donuts will be fine if they start with$1.001, so they start with it