A) Its dominant strategy is medium prices. B) Firm 2 does not have a dominant st

Question

A) Its dominant strategy is medium prices.

B) Firm 2 does not have a dominant strategy.

C) Its dominant strategy is high prices.

D) Its dominant strategy could be high or medium prices depending on Firm 1’s response.

E) Its dominant strategy is low prices.

A) Its dominant strategy is medium prices.

B) Firm 2 does not have a dominant strategy.

C) Its dominant strategy is high prices.

D) Its dominant strategy could be high or medium prices depending on Firm 1’s response.

E) Its dominant strategy is low prices.

Explanation / Answer

Option A is correct

Firm 2's dominant strategy is medium prices. (No matter which strategy is chosen by firm 1, firm 2 would get a higher payoff when it chooses medium prices)

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