Lumen OHM Assessment

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Question 1

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 $1000 B gets $1000	A gets $200 B gets $1600
	Increase Output	A gets $1600 B gets $200	A gets $400 B gets $400

What is the dominant strategy for Firm A?

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

Hint

Question 2

What is the dominant strategy for Firm B?

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

Hint

Question 3

What is the Nash Equlibrium (in pure strategy)?

$400, $400
$1600, $200
There is no Nash equilibrium. If both firms play their dominant strategy there will be a Nash Equilibrium.
$200, $1600
$1000, $1000

Hint