Consider the payoff matrix below. The players make their choices simultaneously

Question

Consider the payoff matrix below. The players make their choices simultaneously and without communication between them. The game will be played only once. Each player is aware of the whole payoff matrix. If Firm A decides to raise its price and Firm B decides to cut its price, what is Firm B's payoff? Does Firm A have a dominant strategy? If so. what is it? Does Firm B have a dominant strategy? If so. what is it? Which option - raise, hold, cut - should Firm A choose? Which option should firm B choose? Is there a Nash equilibrium in this game? If so. which outcome is it? (Describe the outcome by giving A's option and B's option.) How many Nash equilibria could there be. at most, in a game with a 3 times 5 payoff matrix? Consider the payoff matrix below. Two firms are thinking about offering a new model of their product. There is not enough demand for both firms to have good sales if they both offer the new model. What is a value of X that will make this game a prisoner's dilemma problem? As a prisoner's dilemma problem, which outcome is the dominant strategy equilibrium? As a prisoner's dilemma problem, which outcome would the firms choose if they could collude? (Assume that the two firms can talk to each other, but they cannot exchange funds for each other's cooperation.)

Explanation / Answer

a. Firm B's payoff = 40

b Firm A doesn't have dominant strategy

c Firm B has a dominant strategy as to Cut Price

d Hold price

e Cut Price

f yes, ther is nash quilibrium , it where Player A holds Price and gets apayoff of 40 and Player B cuts price and gets payoff of 50

2.

a X = 35

b Firm A and B both Offer

c Firm A and B both Not Offer

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