Suppose two companies, Macrosoft and Apricot, are considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars). Which of the following statements is correct?
A)Apricot's dominant strategy is to develop a touch-screen t-shirt.
B)Apricot's dominant strategy is to develop a touch-screen t-shirt if Macrosoft does not.
C)Apricot's dominant strategy is to not develop a touch screen t-shift.
D)Apricot does not have a dominant strategy.

Question

Suppose two companies, Macrosoft and Apricot, are considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars).  Which of the following statements is correct?
A)Apricot's dominant strategy is to develop a touch-screen t-shirt. 
B)Apricot's dominant strategy is to develop a touch-screen t-shirt if Macrosoft does not. 
C)Apricot's dominant strategy is to not develop a touch screen t-shift. 
D)Apricot does not have a dominant strategy.

Quizplus · Accepted Answer

Apricot does not have a dominant strategy in this scenario, as the best outcome depends on Macrosoft's decision. If Macrosoft develops a touch-screen t-shirt, Apricot is better off not developing the product and avoiding the costs of development (resulting in a payoff of $0 million). If Macrosoft does not develop the product, Apricot is better off developing the touch-screen t-shirt and earning a payoff of $6 million. Therefore, Apricot's decision depends on Macrosoft's decision, meaning that Apricot does not have a dominant strategy.

Suppose Two Companies, Macrosoft and Apricot, Are Considering Whether to Develop