In a bidding war between two firms, if both firms bid low and reach a Nash Equilibrium, which of the following statements is true about their strategies?

In a bidding war, a Nash Equilibrium occurs when both firms choose their strategies in such a way that neither can benefit by changing their bid alone. If both firms bid low, it means they have reached a point where they believe that increasing their bid would not lead to a better outcome for themselves. This happens because if one firm raises its bid while the other keeps it low, the higher bidder may lose the auction. For example, if Firm A and Firm B both bid $100 for a project, and they know that bidding higher would only increase costs without guaranteeing a win, they will stick to their low bids. Therefore, in this situation, both firms have settled on a strategy that is stable, but it may not be the most profitable for either in the long run.