Scenario: The payoff matrix given below shows the payoffs to two firms in millions of U.S. dollars for choosing two alternative strategies. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player.

-Refer to the scenario above.Which of the following is true in this case?
A) This game has multiple Nash equilibria.
B) This game does not have a Nash equilibrium.
C) The dominant strategy equilibrium of this game is also its Nash equilibrium.
D) The dominant strategy equilibrium of this game is not Pareto efficient.

Question

Scenario: The payoff matrix given below shows the payoffs to two firms in millions of U.S. dollars for choosing two alternative strategies. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player.
 
-Refer to the scenario above.Which of the following is true in this case?
A) This game has multiple Nash equilibria. 
B) This game does not have a Nash equilibrium. 
C) The dominant strategy equilibrium of this game is also its Nash equilibrium. 
D) The dominant strategy equilibrium of this game is not Pareto efficient.

Quizplus · Accepted Answer

The dominant strategy equilibrium of this game is also its Nash equilibrium. Both firms have a dominant strategy to choose strategy A, which results in a payoff of 2 million for the row player and 4 million for the column player. This is also the Nash equilibrium because neither player has an incentive to deviate from this strategy given the other player's strategy. There are no other possible strategies that would result in a better payoff for either player. Therefore, the dominant strategy equilibrium is also the Nash equilibrium.

Scenario: the Payoff Matrix Given Below Shows the Payoffs to Two