Refer to the payoff matrix below and answer the question that follows. B\'s Stra
ID: 2495008 • Letter: R
Question
Refer to the payoff matrix below and answer the question that follows.
B's Strategy
Raise Price
Don't Raise Price
Raise
A's profit $3,000
A's profit $10,000
Price
B's profit $3,000
B's profit $15,000
A's Strategy
Don't
A's profit $15,000
A's profit $5,000
Raise
B's profit $10,000
B's profit $5,000
Does Firm A have a dominant strategy?
If yes, what is it? Explain your answer.
If not, what is firm A's optimal strategy? Explain your answer.
Raise Price
Don't Raise Price
Raise
A's profit $3,000
A's profit $10,000
Price
B's profit $3,000
B's profit $15,000
A's Strategy
Don't
A's profit $15,000
A's profit $5,000
Raise
B's profit $10,000
B's profit $5,000
Explanation / Answer
yes fairm A have a dominant strategy " Don't Raise Price".Because the sum of the payoffs of the second strategy( Don't Raise Price) are greater than the sum of the first strategy ( Raise Price). also notice that player B also have dominant strategy "Dont Raise Prices". therefore, there is a dominant strategy equilibrium and which is a nash equilibrium too.
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