In the above table, if the players use a maximin strategy,
A)firm A produces a High Quality product and firm B produces a Low Quality product.
B)the equilibrium choice is the same as using a regular, best response strategy.
C)both firms produce a High Quality product.
D)firm A produces a Low Quality product and firm B produces a High Quality product.

Question

In the above table, if the players use a maximin strategy,
A)firm A produces a High Quality product and firm B produces a Low Quality product. 
B)the equilibrium choice is the same as using a regular, best response strategy. 
C)both firms produce a High Quality product. 
D)firm A produces a Low Quality product and firm B produces a High Quality product.

Quizplus · Accepted Answer

Under maximin strategy, each player chooses the option that maximizes their minimum payoff. In this table, the worst-case scenario for firm A is if firm B chooses High Quality and firm A chooses Low Quality, resulting in a payoff of 1. Similarly, the worst-case scenario for firm B is if firm A chooses High Quality and firm B chooses Low Quality, resulting in a payoff of 2. Therefore, both firms will choose High Quality, as it ensures a minimum payoff of 3 for each player. This outcome is different from the equilibrium choice under a regular, best response strategy, which would be for firm A to choose Low Quality and firm B to choose High Quality.

In the Above Table, If the Players Use a Maximin