Elucidate why it is a nash equilibrium

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Reference no: EM1360284

Consider two firms, A and B, that produce super computers. Each can produce the next generation super computer for math (M) or for chip research (C). However, only one can successfully produce for both markets simultaneously. Also, if one produces one type, the other might not be able to successfully produce the same type, because of the limited market. The following payoff matrix illustrates the problem.

Firm B
M C
Firm A M 2, 1 2, 2
C 1, 1 3, 2

Find the Nash equilibrium (include the payoff in your answer), and explain why it is a Nash equilibrium.

Reference no: EM1360284

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