Consider the following game in which two firms decide how much of a homogeneous good to produce.
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Question:
Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs:
Firm B - low output | Firm B - high output | |
Firm A - low output | 300, 250 | 200, 100 |
Firm A - high output | 200, 75 | 75, 100 |
Suppose the technology decision between A and B will be made simultaneously. Answer the following questions:
(a)What is (are) the dominant strategy (strategies) in this game? Explain interms of the payoffs.
(b) Identify the Nash equilibrium (equilibria), if there is (are) any, for this simultaneous decision. Explain.
Expert Answer:
Dominant strategy is one which a player chooses irrespective of what other player choos... View the full answer
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