Use the following table to answer the question : Table 15-3: Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.

-Refer to Table 15-3.Using the method of iterated dominance it can be concluded that the outcome of the given payoff matrix is:
A)a dominant-strategy equilibrium.
B)indeterminate as there are no dominant strategies.
C)both players choosing a low pricing strategy.
D)both players choosing a high pricing strategy.

Question

Use the following table to answer the question : Table 15-3: Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.

-Refer to Table 15-3.Using the method of iterated dominance it can be concluded that the outcome of the given payoff matrix is:

-Refer to Table 15-3.Using the method of iterated dominance it can be concluded that the outcome of the given payoff matrix is:
A)a dominant-strategy equilibrium. 
B)indeterminate as there are no dominant strategies. 
C)both players choosing a low pricing strategy. 
D)both players choosing a high pricing strategy.

Quizplus · Accepted Answer

The payoff matrix shows that Player 1 has a dominant strategy of choosing a high pricing strategy, regardless of Player 2's choice. Player 2 also has a dominant strategy of choosing a high pricing strategy, regardless of Player 1's choice. Therefore, the outcome of the game is a dominant-strategy equilibrium in which both players choose a high pricing strategy.

Use the Following Table to Answer the Question : Table