Question

AT& T and MCI are competing in the long- distance telephone market. Both companies are considering whether to offer a discount calling plan to attract new customers. Their payoffs depend as follows on the combinations of strategies chosen:
If both companies offer discount calling plans, then each company loses $8 million.
If AT& T offers a discount calling plan and MCI does not, then AT& T makes a profit of $15 million and MCI suffers a loss of $12 million.
If MCI offers a discount calling plan and AT& T does not, then MCI makes a profit of $5 million and AT& T suffers a loss of $6 million.
If neither company offers a discount calling plan, each makes a profit of $6 million.
Which of following statements is true?
a. The dominant strategy for AT& T is to offer a discount calling plan.
b. Only one Nash equilibrium pair of strategies exists.
c. If AT& T offers a discount calling plan, the best strategy for MCI is not to offer a discount calling plan.
d. This game is a prisoner’s dilemma.
e. None of the above statements is true.



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  • CreatedDecember 12, 2014
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