Say that two firms supply the entire quantity of a good in a market, and that ba

Question

Say that two firms supply the entire quantity of a good in a market, and that barriers exist which prevent other firms from entering the market. The two irms agree to limit the quantity they produce to raise the market price. The situation is as described in the fngure at the link below http:/drive google.com/ûle/d1TTM6a72UGY4TZLDLuvRm.3jdRR2vol2q/view?usp-sharing 4.2. The dominant strategy is: 0 A. Defect O B. Cooperate O C. There is no dominant strategy O D. It depends what the other player does Continue without saving

Explanation / Answer

Answer

option A

the dominant strategy for both is defeat because both will choose to defeat in any situation or any of the action of the other.

the payoff is higher if the firm chooses defeat than to cooperate in both situations.

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