Lumen OHM Assessment

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 $4000 B gets $4000	A gets $800 B gets $6400
	Increase Output	A gets $6400 B gets $800	A gets $1600 B gets $1600

What is the dominant strategy for Firm A?

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

Hint

What is the dominant strategy for Firm B?

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

Hint

What is the Nash Equlibrium (in pure strategy)?

$800, $6400
$4000, $4000
$6400, $800
$1600, $1600
There is no Nash equilibrium. If both firms play their dominant strategy there will be a Nash Equilibrium.

Hint