The above figure shows the payoff for two firms, A and B, that must ea

The above figure shows the payoff for two firms, A and B, that must each choose to sell either at a high or low price. Determine the dominant strategies for each firm (if any) and the Nash equilibria (if any).

What will be an ideal response?

ANSWER

For both firms the dominant strategy is to price low. Thus, the Nash equilibrium is for both firms A and B to price their product low. Note that the total profit is less than if they had both priced the product at a high price.