|Orange||Gap: $120M AT: $100M||Gap: $50M AT: $70M|
|Pink||Gap: $70M AT: $50M||Gap: $100M AT: $120M|
Ann Taylor and Gap are two clothing companies that must decide on the leading color palette for next season. Their sales depend on the choice of color they make as well as the choice their competitor makes. Their salaries are summarized in the payoff matrix above. Using the payoff matrix, which of the following is correct:
A. The Nash Equilibrium is for one company to choose pink while the other company chooses orange.
B. The only Nash Equilibrium is for both companies to choose pink.
C. The only Nash Equilibrium is for both companies to choose orange.
D. There are two Nash Equilibria: either both companies choose pink or both choose orange.