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 $3500 B gets $3500	A gets $700 B gets $5600
	Increase Output	A gets $5600 B gets $700	A gets $1400 B gets $1400

What is the dominant strategy for Firm A?

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

Hint

What is the dominant strategy for Firm B?

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

Hint

What is the Nash Equlibrium (in pure strategy)?

$700, $5600
$1400, $1400
There is no Nash equilibrium. If both firms play their dominant strategy there will be a Nash Equilibrium.
$3500, $3500
$5600, $700

Hint