Question

Two firms operating in the same market must choose between a high price and a low price. In the payoff matrix below, Firm A's profit is listed before the comma, B's profit is listed after the comma. The firms are playing a one-period (“one shot”) simultaneous game. Firm B High Price Low Price Firm A High Price 40,40 18,50 Low Price 50,18 25,25 a. State whether each firm does or does not have a dominant strategy. No explanation is necessary – you need only clearly indicate your answer . Firm A strategy is low price, b. Is the above game a Prisoners’ Dilemma? Briefly explain why or why not.

Answer 1