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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 $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?

Hint


Question 2
What is the dominant strategy for Firm B?

Hint


Question 3
What is the Nash Equlibrium (in pure strategy)?

Hint