Consider the following output-choice game for two firms: Firm 2 – low

Consider the following output-choice game for two firms:

Firm 2 – low Firm 2 – medium Firm 2 – high
Firm 1 – low 150, 150 100, 160 75, 100
Firm 1 – medium 160, 100 110, 110 50, 75
Firm 1 – high 100, 75 75, 50 0, 0

What is the outcome of the game if both firms use maximin strategies?
A) Both firms choose low output levels.
B) Both firms choose medium output levels.
C) There is no clear outcome under a maximin strategy for both firms.
D) There are two possible maximin outcomes — Firm 1 chooses medium and Firm 2 chooses low, or Firm 1 chooses low and Firm 2 chooses medium.

ANSWER

A