The table given below represents the payoff matrix of firms A and B,when they choose to produce low or high output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs.
-The information in Table 14-2 implies that the game has:
A)a Nash equilibrium and a dominant-strategy equilibrium.
B)a Nash equilibrium but not a dominant-strategy equilibrium.
C)no Nash equilibrium but has a dominant-strategy equilibrium.
D)neither a Nash equilibrium nor a dominant-strategy equilibrium.

Question

The table given below represents the payoff matrix of firms A and B,when they choose to produce low or high output.In each cell,the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. 
-The information in Table 14-2 implies that the game has:
A)a Nash equilibrium and a dominant-strategy equilibrium. 
B)a Nash equilibrium but not a dominant-strategy equilibrium. 
C)no Nash equilibrium but has a dominant-strategy equilibrium. 
D)neither a Nash equilibrium nor a dominant-strategy equilibrium.

Quizplus · Accepted Answer

The game has a Nash equilibrium at (High, High) where both firms choose to produce high output since both firms earn higher payoffs by doing so. However, there is no dominant strategy for either firm. For example, if Firm B chooses to produce low output, Firm A's best response is to produce high output, and if Firm B chooses to produce high output, Firm A's best response is also to produce high output. Similar reasoning applies to Firm B. Therefore, there is no dominant strategy for either firm.

The Table Given Below Represents the Payoff Matrix of Firms