Question 4
?Two firms, Small and Large, compete by price. Each can
choose either a low price or a high price. The following payoff
table shows the profit (in thousands of dollars) each firm
would earn in each of the four possible decision situations:
Large
Low price
High price
Low price
$200, $500
$600, $600
Small
High price
$0, $1500
$400, $1000
a. Is there a dominant strategy for Small? If so, what is it? Why?
b. Is there dominant strategy for Large? If so, what is it? Why?
c. What is the likely pair of decision? What payoff will each receive?