19. Consider a duopoly pricing game (with differentiated pro…
19. Consider a duopoly pricing game (with differentiated products that are substitutes) wherein we compare the non-cooperative Nash Equilibrium and the joint-profit maximizing cooperative arrangement – illustrated in the game matrix below. Give the firms two choices: (1) Play Non-cooperatively (which will have both charging a price of $4 if we solve the game using profit-maximization and simultaneous choice assumption), or (2) Play cooperatively (both charging a price of $4.50). In this game, assume these two choices must be made simultaneously and that we have only a one-period game. What is the Nash Equilibrium of this game?