Final Answer:
The Nash equilibrium of the game is e. There is no Nash equilibrium.
Step-by-step explanation:
In game theory, a Nash equilibrium is a situation in which no player can unilaterally change their strategy to achieve a better outcome, given the strategies chosen by the other players. In the context of the provided options:
a. (Reduce Tariffs; Reduce Tariffs): If both players reduce tariffs, it may not be a stable equilibrium if one player has an incentive to deviate by imposing tariffs.
b. (Reduce Tariffs; Impose Tariffs): This combination is not a Nash equilibrium if the player imposing tariffs has an incentive to switch to reducing tariffs.
c. (Impose Tariffs; Reduce Tariffs): Similarly, this combination is not a Nash equilibrium if the player reducing tariffs has an incentive to switch to imposing tariffs.
d. (Impose Tariffs; Impose Tariffs): If both players impose tariffs, it may not be stable if one player can achieve a better outcome by reducing tariffs.
e. There is no Nash equilibrium: This option suggests that no combination of strategies is stable, meaning that players always have an incentive to deviate from their chosen strategy. This scenario would result in a lack of a stable Nash equilibrium.
In summary, based on the nature of the provided strategies and potential incentives for players to deviate, the Nash equilibrium of the game is identified as e. There is no Nash equilibrium.