What is a dominant strategy in game theory? Using the payoff matrix shown in Box 14.1, replace the entry in the fi rst row and second column with (125, –50). Does A have a dominant strategy? Does B? What is the solution to this game?

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P Surplus over variable Demand R R cost C C Marginal revenue Surplus over variable cost Q A. Private Sector Q B. Medicare Sector Figure 14.1 Analysis of Changes in the Medicare Hospital Reimbursement Rate Average variable cost