The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital. Firm A's dominant strategy is to ________, and Firm B's dominant strategy is to ________.
A)invest; not invest
B)not invest; invest
C)invest; invest
D)not invest; not invest

Question

The payoff matrix below shows the payoffs (in millions of dollars)for two firms, A and B, for two different strategies, investing in new capital or not investing in new capital.  Firm A's dominant strategy is to ________, and Firm B's dominant strategy is to ________.
A)invest; not invest 
B)not invest; invest 
C)invest; invest 
D)not invest; not invest

Quizplus · Accepted Answer

Investing yields a higher payoff for each firm regardless of what the other firm does, so it is the dominant strategy for each firm.

The Payoff Matrix Below Shows the Payoffs (In Millions of Dollars)for