What are the dominant strategies for Firm A and Firm B respectively?
A)(low price, high price).
B)(high price, low price).
C)(high price, high price).
D)neither firm has a dominant strategy.

Question

Quizplus · Accepted Answer

Neither firm has a dominant strategy because the optimal choice for each firm depends on the decision made by the other firm. If Firm A chooses to set a low price, then Firm B will have an incentive to set a high price to capture a larger share of the market. Conversely, if Firm A sets a high price, then Firm B may choose to set a low price to attract price-sensitive customers. Similarly, the optimal choice for Firm B depends on the choice made by Firm A. Therefore, there is no dominant strategy for either firm.

What Are the Dominant Strategies for Firm a and Firm