Refer to the payoff matrix at right for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation? A. Both firm A and firm B choose the low price. B. Firm A chooses the high price while firm B chooses the low price. C. Firm A chooses the low price while firm B chooses the high price. D. Both firm A and firm B choose the high price.

Question

Business

Shyanne Rivera

1 December, 00:23

Refer to the payoff matrix at right for the profits (in $ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation? A. Both firm A and firm B choose the low price. B. Firm A chooses the high price while firm B chooses the low price. C. Firm A chooses the low price while firm B chooses the high price. D. Both firm A and firm B choose the high price.

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Answers (1)

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Monique Atkinson · Answer 1

A. Both firm A and firm B choose the low price.

Explanation:

In a strategy of this form, it is said that both firm A and B chose the same pricing strategies which is of high and low.

In other words, a payoff matrix is defined as a visual representation of all the possible outcomes that can occur when two people or groups have to make a strategic decision. The decision is referred to as a strategic decision because each decision maker has to take into consideration how their choice will affect their opponent's choice and how their opponent's choice will affect their own choice. The payoff matrix illustrates each possible strategy that one side can choose, as well as every combination of outcomes that are possible based on each opponent's choice.