For the animal feed industry, lysine is a feed additive and historically there were two major manufacturers of lysine, ADM and Ajinomoto. For this question, assume that these two firms must decide how much lysine they will produce. The profits for the two firms are interdependent: each firm’s profits depend not only on its own decision about how much to produce but also on the other firm’s decision about production. In the following table, each row represents a potential action by ADM, and each column represents a potential action by Ajinomoto. Review this table (hint – it’s a payoff matrix), and then answer the questions that follow,

	Ajinomoto produces 30 million tons of lysine	Ajinomoto produces 40 million tons of lysine
ADM produces 30 million tons of lysine	Ajinomoto’s profits = $2100M ADM’s profits = $210M	Ajinomoto’s profits = $230M ADM’s profits = $180M
ADM produces 40 million tons of lysine	Ajinomoto’s profits = $180M ADM’s profits = $230M	Ajinomoto’s profits = $190M ADM’s profits = $190M

a) Is there a dominant strategy for ADM? Yes/no? Explain.

b) Is there a dominant strategy for Ajinomoto? Yes/no? Explain.

c) What is the Nash Equilibrium solution for this pay-off matrix? Explain briefly.

d) What might the solution be if the two companies were able to repeat the "game?" Why? What simple strategy might they use to maintain their cooperative/collusive arrangement without communicating with each other directly (so no need for secret meetings or confidential agreements)?

Answer rating: 100% (QA)

a Is there a dominant strategy for ADM Yesno Explain Yes there is a dominant strategy for ADM A dominant strategy is a strategy that is always the best choice for a player regardless of what the other ... View the full answer