Question

Corporate Coffee (CC) Moves First Jumbo Java (JJ) Moves Second Profits (CC, JJ) <Center Home> <Center Home> Enter A (2,-3) Enter Don't Enter * c (10, 0) Enter » B (O, 8) Don't Enter JJ2 Don't Enter D (0, 0)

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. Assuming the two firms have perfect information about this game, what can we conclude about the existence of a Nash equilibrium?

Select one:

A. The solution to the game is a Nash equilibrium.

B. There are multiple Nash equilibriums for this game.

C. There is no Nash equilibrium for this game.

D. There is a Nash equilibrium, but it occurs at a different outcome than the solution to the game.

Answer 1

Answer:

C. there is no Nash equilibrium for this game

Because :

• If CC and JJ both enters than the payoff of CC is 2 (profit) while payoff of JJ is -3 (loss), not a Nash equilibrium
• If CC enters and JJ does not than the payoff of CC is 10 while payoff of JJ is 0, also not a Nash equilibrium
• If CC don’t enter and JJ does than the payoff of CC is 0 while payoff of JJ is 8, also not a Nash equilibrium
• If both doesn’t enter than payoff is (0,0), this action is also not a Nash equilibrium.