We can also quickly confirm that Low, Low isn't a Nash equilibrium. Again, as indicated by the arrows, neither firm is content with playing Low so long as they believe the other will continue to do so.

   Remeber that a Nash equilibrium means that each player is doing the best possible given what the other players are doing.

   One way we can track down Nash equilibria is to put in arrows, as we have here, wherever either player would change her strategy if the other player did not.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved