Question

             Left     Center     Right
Top       4, 5        1, 6         5, 6
Middle 3, 5       2, 5          5, 4
Bottom 2, 5        2, 0         7, 0

Show that posting a price of 0 dollars and posting a price of 6 dollars are both dominated strategies. What
about the strategy of posting a price of $4? $5?

Answer 1

In the figure above, both A and B are competing in the business, both are trying to get their business strategy which can maximize their profit. Since the average cost is same both A and B attain maximum profit . In the case $4 and $5, it will lead to a collusion , it will be benefited only through iterated Elimination of Dominated Strategy.

In the perfect combination, the consumers and the producers will be benefited by maximum profit to the producer and the consumer surplus for customers. In the monopoly, it will be benefited to the producer. In the right 5,6. In the above game theory a maximum strategy is one chosen by a player to maximise the minimum gain that it can earn . In the monopoly , the producer who plays a maximum strategy assumes that the opposition will play the strategy that does the most damage. So he will choose the monopolist plays the right top strategy.