Scenario 6.1: Tasha and Gloria are friends who each produce beaded headbands. Each can choose to work somewhat hard and expend $10 worth of effort, or can work extremely hard and expend $15 worth of effort. If either works somewhat hard, she can produce headbands that sell for a total of $22. If either works extremely hard, she can produce headbands which sell for a total of $30. Both Tasha and Gloria are equally good at making beaded headbands.
-Refer to Scenario 6.1. The dominant strategy is for Tasha to work ________ and for Gloria to work ________.
A) extremely hard; extremely hard
B) extremely hard; somewhat hard
C) somewhat hard; extremely hard
D) somewhat hard; somewhat hard

Question

Quizplus · Accepted Answer

The dominant strategy for both Tasha and Gloria is to work extremely hard because this maximizes their individual payoffs. Working extremely hard results in a total revenue of $30, which, even after subtracting the higher effort cost of $15, leaves them with a higher net gain compared to working somewhat hard, which would result in a total revenue of $22 with a cost of $10.