Practice question · Multiple choice
In the pricing game, Low is a dominant strategy for both firms. Why does that make the outcome predictable without knowing anything about what either firm believes?
Hints
- Fix the rival’s choice at High and find your best reply. Now fix it at Low.
- If the answer is the same either way, what do you need to know about the rival?
Show the answer
A. Because a dominant strategy is the better reply whatever they do
Why
Dominance removes the need to predict anyone. That is what makes it the strongest solution concept, and why the prisoner’s dilemma outcome is so robust despite being worse for both.
Practise Game Theory in Business
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