-Refer to Figure 2.1, which represents a noncooperative, one-time, static game. Firm A's secure strategy is:
A) Raise price.
B) Don't raise price.
C) It's dominant strategy.
D) It's dominated strategy.
E) Answers b and d are correct.

Question

-Refer to Figure 2.1, which represents a noncooperative, one-time, static game. Firm A's secure strategy is:
A) Raise price. 
B) Don't raise price. 
C) It's dominant strategy. 
D) It's dominated strategy. 
E) Answers b and d are correct.

Quizplus · Accepted Answer

A secure strategy, often referred to as a safe strategy, is one that results in the best payoff for a player, assuming the worst-case scenario with the other players' strategies. In the context of Firm A, not raising the price would be considered a secure strategy if it guarantees Firm A the best possible outcome against Firm B's possible actions, assuming the worst-case scenario. Additionally, if this strategy is also Firm A's dominated strategy, it means that in every possible scenario, not raising the price leads to a less favorable outcome compared to other strategies Firm A could choose. Therefore, without specific payoff matrices or further details, the concept of a secure strategy aligns with not raising the price if it ensures the best outcome under the worst conditions, and if it's also considered a dominated strategy, it implies that there's always a better option available, which in this context, seems contradictory. Thus, the correct interpretation hinges on the specific details of the game which are not provided. However, based on the options given and typical game theory terminology, the answer suggests a combination of not raising the price and it being a dominated strategy, which typically would not align in standard game theory context as secure and dominated strategies imply different things.