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 $3000 B gets $3000	A gets $600 B gets $4800
	Increase Output	A gets $4800 B gets $600	A gets $1200 B gets $1200

What is the dominant strategy for Firm A?

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

Hint

Question 2

What is the dominant strategy for Firm B?

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

Hint

Question 3

What is the Nash Equlibrium (in pure strategy)?

There is no Nash equilibrium. If both firms play their dominant strategy there will be a Nash Equilibrium.
$1200, $1200
$3000, $3000
$600, $4800
$4800, $600

Hint