Lumen OHM Assessment

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Two firms have the following options: Hold Down Output (cooperate with other firm) or Increase Output (do not cooperate with other firm) Consider the following payoff matrix:

		Firm B
		Hold Down Output	Increase Output
Firm A	Hold Down Output	A gets $5000 B gets $5000	A gets $1000 B gets $8000
	Increase Output	A gets $8000 B gets $1000	A gets $2000 B gets $2000

What is the dominant strategy for Firm A?

There is no dominant strategy.
Increase Output.
Hold Down Output.

Hint

What is the dominant strategy for Firm B?

There is no dominant strategy.
Increase Output.
Hold Down Output.

Hint

What is the Nash Equlibrium (in pure strategy)?

$5000, $5000
$1000, $8000
There is no Nash equilibrium. If both firms play their dominant strategy there will be a Nash Equilibrium.
$8000, $1000
$2000, $2000

Hint