Problem
If Bud and Wise in Problem 10 play the game repeatedly, what is the equilibrium of the game?
Problem 10
Bud and Wise are the only two producers of aniseed beer, a New Age product designed to displace root beer. Bud and Wise are trying to figure out how much of this new beer to produce. They know:
(i) If they both produce 10,000 litres a day, they will make the maximum attainable joint economic profit of $200,000 a day, or $100,000 a day each.
(ii) If either firm produces 20,000 litres a day while the other produces 10,000 litres a day, the one that produces 20,000 litres will make an economic profit of $150,000 and the other will incur an economic loss of $50,000.
(iii) If both produce 20,000 litres a day, each firm will make zero economic profit.
Construct a payoff matrix for the game that Bud and Wise must play.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.