The market for bagels contains two firms: BagelWorld (BW) and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars) depends on whether they abide by the agreement or cheat on the agreement. In the Nash equilibrium of this game:

A. both firms cheat on the agreement
B. Bagel World cheats and Bagels 'R' Us abides
C. Bagel World abides and Bagels 'R' Us cheats
D. both firms abide by the agreement


Answer: A

Economics

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