Bud and Wise are the only two producers of aniseed beer, a New Age product desig

Question

Bud and Wise are the only two producers of aniseed beer, a New Age product designed to displace root beer The payoff matrix shows the game that Bud and Wise play. >>>The numbers in the table are given in dollars Bud (red squares) 20,000 gallons 10,000 gallons The Nash equilibrium is that. -200,000 0 A, both Bud and Wise produce 20,000 gallons O B. Bud produces 20,000 gallons and Wise produces 10,000 gallons ° C. Bud and Wise both limit production to 10,000 gallons 0 D. Wise produces 20,000 gallons and Bud produces 10,000 gallons 20,000 gallons 300,000 Wise blue squares) 300,000 100,000 10,000 gallons - 200,000 100,000

Explanation / Answer

Answer

Option A

The dominant strategy is played by a player instead of any strategy by the opponent.

because

Bud pays 20000 gallons then Wise will play 20000 gallons because he will get the higher payoff.

0>-200000

Bud plays 10000 gallons then Wise will play 20000 gallons because he will get the higher payoff,

300000>100000

in the same way, Bud will react to Wise for his strategies because the payoff is same so both have  20000 gallons is the dominant strategy.

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