(Scenario: Payoff Matrix for Steve's Skateboards and Savannah's Highflyers) Use Scenario: Payoff Matrix for Steve's Skateboards and Savannah's Highflyers. If Savannah were to choose her BEST response, she would:

A)choose a low price.
B)choose a high price.
C)encounter a dilemma, since there are two dominant strategies.
D)allow Steve to dominate the industry.

Question

(Scenario: Payoff Matrix for Steve's Skateboards and Savannah's Highflyers) Use Scenario: Payoff Matrix for Steve's Skateboards and Savannah's Highflyers. If Savannah were to choose her BEST response, she would:
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A)choose a low price. 
B)choose a high price. 
C)encounter a dilemma, since there are two dominant strategies. 
D)allow Steve to dominate the industry.

Quizplus · Accepted Answer

Based on the payoff matrix, Savannah's best response would be to choose a high price. This is because if she chooses a low price and Steve chooses a low price as well, they will both receive a low payoff. However, if Savannah chooses a high price and Steve chooses a low price, Savannah will receive a higher payoff than if she chose a low price as well. Similarly, if Savannah chooses a high price and Steve chooses a high price, Savannah will still receive a higher payoff than if she chose a low price as well. Therefore, her best response is to choose a high price.