Question

  column player

     low price  high price

Row   low price  0, 0  50, -10

Player   high price  -10, 50  10, 10

The numbers in the matrix represent profit.  The row player has a dominant strategy of a low price (0 is better than -10 and 50 is better than 10)  and the column player has a dominant strategy of a low price as well (similar numbers). And, low low is a Nash equilibrium.

A dilemma that arises here is that both could be better off if they both went with a high price.

If the row player was at a low price strategy you would pick which strategy, low or high price?

If the row player was at a high price strategy you would pick which strategy, low or high price?

True or false - based on what the the row player does you will always pick the high price?

In order to assist you in understanding what we call a Nash equilibrium, consider the following:

True of false - if the column player is at a high price you will stay at a high price.

Answer 1

1)

the row player was at a low price strategy you would pick which strategy, low or high price

Low price

.

If the row player was at a high price strategy you would pick which strategy, low or high price

2) Low price

.

True or false - based on what the the row player does you will always pick the high price

.

3) False

independent of what does Row player plays, column player always selects low price, as it provides higher utility, so Low price is dominant strategy Eqm

.

True of false - if the column player is at a high price you will stay at a high price.

4) False

if column player plays H, row player gets higher payoff of 50 from low price