Given the following two firm oligopoly game, what is the dominant strategy for t

Question

Given the following two firm oligopoly game, what is the dominant strategy for the cereal companies, Kellogg(K) and Post (P)? Note that the profits for each company are listed in the Table above.:

Question 3 options:

K, lower price; P, lower price

K, lower price; P, raise price

K,raise price; P, lower price.

K, raise price; P, raise price

None of the above

K, lower price; P, lower price

K, lower price; P, raise price

K,raise price; P, lower price.

K, raise price; P, raise price

None of the above

Explanation / Answer

4. K, raise price, p raise price

This is because from this they get maximum benefit. If they both choose lower price, they still get a profit of $2 billion each but it is still lower as comparied to raising price strategy.

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