Dell and HP must both simultaneously prices for their new laptops.They can both either choose to set a Low or High price.The payoffs are as follows.If both firms set a Low price, Dell gets 5 and HP 6.If both firms set a High price, the payoffs are 7 to Dell and 8 to HP.If Dell sets a High price and HP chooses Low, the payoffs are 3 to Dell and 10 to HP.If Dell sets a Low price and HP opts for High, the payoffs are 9 to Dell and 1 to H.What statement is true?
A)Dell has a dominant strategy, but HP does not have a dominant strategy.
B)The dominant strategy equilibrium is (Low, Low).
C)Each firm has a dominant strategy; this game is a prisoners' dilemma.
D)b and c are true.
E)Neither player has a dominant strategy; this is a prisoner's dilemma.

Question

Quizplus · Accepted Answer

Dell's dominant strategy is to set a Low price, regardless of HP's choice. HP's dominant strategy is to set a High price if Dell sets a Low price, and to set a Low price if Dell sets a High price. This game is a prisoners' dilemma because both firms would be better off if they both set a Low price, but each firm has an incentive to set a High price if the other firm sets a Low price.

Dell and HP Must Both Simultaneously Prices for Their New