Concept: Duopoly Game 2 Consider a market with two fims, Target and Wal-Mart, th

Question

Concept: Duopoly Game 2 Consider a market with two fims, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ($30) or a low price ($13) for the new Miley Cyrus CD These price strategies with cormesponding profts are depicted in the payoffmatrik to the right. Targe's profits are in red and Wal-Mart's are in blue. Target's dominant strategy is to pick a price of s Target Price # S30 Price . $13 500 Price $30 $10,000 $13, Wal - Mart 13,000 500 Price $13 $2,500

Explanation / Answer

Answer is $13

A dominant strategy is the best action chosen by a player irrespective of what other players select. Target has a dominant strategy of selecting a price of $13 for whatever price selected by Wal-mart. This is because its profits are 13000 vs 10000 and 5500 vs 2500 when it selects a price of $13.

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