Table 16-16
Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).

-Refer to Table 16-16.What is grocery store 1's dominant strategy?
A)Grocery store 1 does not have a dominant strategy.
B)Grocery store 1 should always set a low price.
C)Grocery store 1 should always set a high price.
D)Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a high price when grocery store 2 sets a high price.

Question

Table 16-16
Consider a small town that has two grocery stores from which residents can choose to buy a gallon of milk. The store owners each must make a decision to set a high milk price or a low milk price. The payoff table, showing profit per week, is provided below. The profit in each cell is shown as (Store 1, Store 2).
 
-Refer to Table 16-16.What is grocery store 1's dominant strategy?
A)Grocery store 1 does not have a dominant strategy. 
B)Grocery store 1 should always set a low price. 
C)Grocery store 1 should always set a high price. 
D)Grocery store 1 should set a low price when grocery store 2 sets a low price, and grocery store 1 should set a high price when grocery store 2 sets a high price.

Quizplus · Accepted Answer

A dominant strategy is one that results in the highest payoff for a player, regardless of what the other player does. If setting a low price always results in a better outcome for grocery store 1, then it is the dominant strategy.

Table 16-16 Consider a Small Town That Has Two Grocery Stores from Stores