The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1
-Refer to Table 15-1.If X = 145 and Y = 62,it is evident that _____.
A)both firms have a dominant strategy.
B)neither firm has a dominant strategy.
C)only company C has a dominant strategy.
D)only company D has a dominant strategy.

Question

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1 
-Refer to Table 15-1.If X = 145 and Y = 62,it is evident that _____.
A)both firms have a dominant strategy. 
B)neither firm has a dominant strategy. 
C)only company C has a dominant strategy. 
D)only company D has a dominant strategy.

Quizplus · Accepted Answer

Based on the given payoffs, neither firm has a dominant strategy as the best strategy for each depends on the strategy chosen by the other firm. For example, if Company C sets a price of $150 (row 1), the best strategy for Company D would be to set a price of $80 (column 2), but if Company C sets a price of $120 (row 2), the best strategy for Company D would be to set a price of $100 (column 3). Therefore, there is no one best strategy for either firm, and both firms must consider the other's strategy in making a decision.

The Following Payoff Matrix Shows the Profits Accruing to Two