Use the table below to answer the following questions.
Table 15.2.2

-Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price,or (2)charge a high price.The equilibrium in this game (played once)will be a dominant strategy equilibrium because
A)firm B will reduce profit by more than A if both charge a lower price.
B)firm B is the dominant firm.
C)the best strategy for each firm does not depend on the strategy chosen by the other firm.
D)there is no credible threat by either firm to "punish" the other if it breaks the agreement.
E)all of the above.

Question

Use the table below to answer the following questions.
Table 15.2.2
 
-Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when there are two strategies facing each firm: (1)charge a low price,or (2)charge a high price.The equilibrium in this game (played once)will be a dominant strategy equilibrium because
A)firm B will reduce profit by more than A if both charge a lower price. 
B)firm B is the dominant firm. 
C)the best strategy for each firm does not depend on the strategy chosen by the other firm. 
D)there is no credible threat by either firm to "punish" the other if it breaks the agreement. 
E)all of the above.

Quizplus · Accepted Answer

The dominant strategy equilibrium occurs when each firm's best strategy is independent of the other firm's strategy, meaning each firm has a dominant strategy that it will choose regardless of what the other firm does.

Use the Table Below to Answer the Following Questions