This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,MiiTunes:
A) has a dominant strategy to charge low prices.
B) does not have a dominant strategy.
C) has a dominant strategy to charge high prices.
D) has more than one dominant strategy.

Question

This figure displays the choices and payoffs (company profits)of two music shops-MiiTunes and The Rock Shop.MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices,in the hopes that a new business will not be able to make a profit at such low prices.The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
According to the figure,MiiTunes:
A) has a dominant strategy to charge low prices. 
B) does not have a dominant strategy. 
C) has a dominant strategy to charge high prices. 
D) has more than one dominant strategy.

Quizplus · Accepted Answer

MiiTunes has a dominant strategy to charge high prices, as regardless of whether The Rock Shop enters the market or not, charging high prices will result in higher profits for MiiTunes. If The Rock Shop enters the market and charges low prices, MiiTunes will still have higher profits by charging high prices. If The Rock Shop does not enter the market, MiiTunes charging high prices will result in the highest profits. Therefore, charging high prices is the best strategy for MiiTunes.

This Figure Displays the Choices and Payoffs (Company Profits)of Two