6 A dominant strategy can best be described as a strategy taken by a dominant pl

Question

6 A dominant strategy can best be described as a strategy taken by a dominant player. the strategy taken by a player in order to dominate its rivals. a strategy that is optimal for a player no matter what an opponent does. a strategy that leaves every player in a game better off. a. b. c. d. 7 In a Nash equilibrium, cach player has a dominant strategy no players have a dominant strategy at least one player has a dominant strategy players may or may not have dominant strategies. a. b. c. d. 8 The following game is a version of the Prisoners' Dilemma. Suspect 2 Fink 0, 0 Silent 3,-1 Suspect Fink Silent a. Both suspects have a dominant strategy that is to fink. b. Both suspects have a dominant strategy that is to keep silent. ominant strategy None of the suspects has a d The suspects may or may not have a dominant strategy d. 9Based on the above information (in question 8), we conclude that a. there is no Nash equilibrium b. the Nash equilibrium payoff would be (0, 0). c. the Nash equilibrium payoff would be (1, 1) d. the information is not sufficient to determine if a Nash equilibrium exists. 10 Given on the following payoff matrix Firm B Low R&D; 100, 220 150, 150 High R&D; 50, 270 200, 120 Firm A Low R&D; High R&D; Both firms have a dominant strategy a. b. None of the firms has a dominant strategy c. Firm A has a dominant strategy while firm B does not. d. Firm B has a dominant strategy while firm A does not. 1 Based on the above information (in question 10), we conclude that a. the Nash equilibrium payoff would be (100, 220) b. the Nash equilibrium payoff would be (150, 150) c. the Nash equilibrium payoff would be (50, 270) d. the Nash equilibrium payoff would be (200, 120) e. there is no Nash equilibrium.

Explanation / Answer

6. The correct option is “c. a strategy that is optimal for a player no matter what an opponent does.”

Dominant strategy refers to the strategy that would provide the larger payoff to a player regardless of the strategy used by the other players. Hence, a strategy which is always better than rest of the strategies will be considered as the dominant strategy.   

7. The correct option is “d. players may or may not have dominant strategies.”

Nash equilibrium refers to the situation when all firms are doing their best given the action of the opponents. In this equilibrium situation, each player’s strategy will be optimal, hence, there would not be any unilateral deviation. Nash equilibrium does not necessarily requires the presence of dominant strategies.

8. The correct option is “a. Both suspects have a dominant strategy that is to fink”.

As per the given table, suspect 1 will fink when suspect 2 finks. Similarly, suspect 1 will fink when suspect 2 is silent. Hence, fink becomes the dominant strategy for suspect 1. Same is the case with suspect 2. When the 1st suspect will fink or remains silent, the best strategy for suspect 2 is to fink. Hence, dominant strategy for both players is to fink.

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