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Figure: Payoff Matrix II for Blue Spring and Purple Rain
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Purple Rain is to:
A) charge a low price.
B) charge a high price.
C) adopt the same strategy as Blue Spring.
D) Purple Rain does not have a dominant strategy.

Question

Use the following to answer questions:
Figure: Payoff Matrix II for Blue Spring and Purple Rain 
-(Figure: Payoff Matrix II for Blue Spring and Purple Rain) Payoff Matrix II for Blue Spring and Purple Rain describes two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Purple Rain is to:
A) charge a low price. 
B) charge a high price. 
C) adopt the same strategy as Blue Spring. 
D) Purple Rain does not have a dominant strategy.

Quizplus · Accepted Answer

A dominant strategy is one that results in a higher payoff for a player, regardless of what the other player does. If Purple Rain's payoff is higher when charging a low price, irrespective of Blue Spring's strategy, then charging a low price is the dominant strategy for Purple Rain.

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