Question

Dell first chooses whether to offer Symantec $30 or $20 for each copy of its software, and then Symantec responds by either accepting or rejecting the offer. The strategies and corresponding profits (in millions) for Dell (D) and Symantec (S) are depicted in the decision tree to the right. What is the Nash equilibrium of the game?

A. Dell will offer $30 per copy of the software and Symantec will accept the offer.

B. Dell will offer $30 per copy of the software and Symantec will reject the offer.

C. Dell will offer $20 per copy of the software and Symantec will reject the offer.

D. Dell will offer $20 per copy of the software and Symantec will accept the offer.

Answer 1

The correct answer is Dell will offer​ $20 per copy of the software and Symantec will accept the offer.

Step-by-step explanation:

A Nash equilibrium is a situation in which all players have put into practice, and know that they have done so, a strategy that maximizes their earnings given the strategies of others. Consequently, no player has any incentive to individually modify their strategy.

It is important to keep in mind that a Nash equilibrium does not imply that the best joint result for the participants is achieved, but only the best result for each of them considered individually. It is perfectly possible that the result would be better for everyone if, in some way, the players coordinated their action.

In economic terms, it is a kind of imperfect balance of competition that describes the situation of several companies competing for the market of the same good and who can choose how much to produce to try to maximize their profit.