Consider the following payoff matrix facing two firms selling the same product in the same market. They must choose whether to price the good at a high or low price. $$\begin{array} { c }
\quad \quad \quad \quad \quad \quad \quad { \text { COMPANY B } } \
\begin{array} { | l | l | c | c | }
\hline & & \text { Low Price } & \text { High Price } \
\hline \text { COMPANY A } & \text { Low Price } & \text { A: } 2 , \text { B: } 2 & \text { A: } 4 , \text { B: } 1 \
\hline & \text { High Price } & \text { A: } 1 , \text { B: } 3 & \text { A: } 6 , \text { B: } 2 \
\hline
\end{array}\end{array}$$ Given this information:
A)A has a dominant strategy but B does not.
B)B has a dominant strategy but A does not.
C)both A and B have dominant strategies.
D)neither A nor B has a dominant strategy.

Question

Consider the following payoff matrix facing two firms selling the same product in the same market. They must choose whether to price the good at a high or low price. $$\begin{array} { c } 
\quad \quad \quad \quad \quad \quad \quad { \text { COMPANY B } } \
\begin{array} { | l | l | c | c | } 
\hline & & \text { Low Price } & \text { High Price } \
\hline \text { COMPANY A } & \text { Low Price } & \text { A: } 2 , \text { B: } 2 & \text { A: } 4 , \text { B: } 1 \
\hline & \text { High Price } & \text { A: } 1 , \text { B: } 3 & \text { A: } 6 , \text { B: } 2 \
\hline
\end{array}\end{array}$$ Given this information:
A)A has a dominant strategy but B does not.
B)B has a dominant strategy but A does not.
C)both A and B have dominant strategies.
D)neither A nor B has a dominant strategy.

Quizplus · Accepted Answer

Company B has a dominant strategy to choose a low price, as it yields a higher payoff regardless of Company A's choice. Company A does not have a dominant strategy, as its best choice depends on Company B's decision.

Consider the Following Payoff Matrix Facing Two Firms Selling the Same