Question

General Instructions

The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampa’s profits are shown in bold. St. Petersburg’s profits are in regular type.

For questions 1 – 10, choose the correct answer to fill in the blanks. Use the suggested words in parentheses after each blank.  A detailed explanation must be given to defend each choice.

		Tampa Tribune
		Low Price		High Price
		A.		B.
	Low price	$120,000		$54,000
St Pete Times			$100,000		$120,000
		C.		D.
	High Price	$90,000		$88,000
			$54,000		$90,000

Question #1Question #2Question #3Question #4Question #5Question #6Question #7Question #8Question #9Question #10Question #11

1.

Tampa Tribune's dominant strategy is ____________ (low price, high price, it has no dominant strategy).

2.

St. Petersburg Times' dominant strategy is ____________ (low price, high price, it has no dominant strategy).

3.

Tampa Tribune's dominated strategy is ____________ (low price, high price, it has no dominant strategy).

4.

St. Petersburg Times' dominated strategy is ____________ (low price, high price, it has no dominant strategy).

Answer 1

Dominant strategy is a strategy for a player i.e. best response to all strategy profile of other player.

1. High price because it gives higher profit to Tampa Tribune irrespective of decision of other player.

2. No dominant strategy because any one strategy does not give higher profit to St. Peterburg Times.

3. High price because it gives higher profit to Tampa Tribune irrespective of decision of other player.

4. No dominant strategy because any one strategy does not give higher profit to St. Peterburg Times.