BiHFanatic09
New member
Speedy Gas
High Price Low Price
High Price $100, $100 $25, $150
Swifty Gas
Low Price $150, $25 $50, $50
There are only two gas stations in a small town, Swifty Gas and Speedy Gas. Each firm can set either a high price or a low price, and customers view these two firms as nearly perfect substitutes. The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision, given the pricing decision of their rival. Profits in each cell of the payoff matrix are given as (Swifty, Speedy). Which of the following choices describes a dominant strategy?
1. Swifty will set a high price when Speedy sets a high price, but Swifty will set a low price when Speedy sets a low price.
2. Swifty will set a low price when Speedy sets a high price, but Swifty will set a high price when Speedy sets a low price.
3. Swifty will always set a high price, no matter Speedy's choice.
4. Swifty will always set a low price, no matter Speedy's choice.
High Price Low Price
High Price $100, $100 $25, $150
Swifty Gas
Low Price $150, $25 $50, $50
There are only two gas stations in a small town, Swifty Gas and Speedy Gas. Each firm can set either a high price or a low price, and customers view these two firms as nearly perfect substitutes. The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision, given the pricing decision of their rival. Profits in each cell of the payoff matrix are given as (Swifty, Speedy). Which of the following choices describes a dominant strategy?
1. Swifty will set a high price when Speedy sets a high price, but Swifty will set a low price when Speedy sets a low price.
2. Swifty will set a low price when Speedy sets a high price, but Swifty will set a high price when Speedy sets a low price.
3. Swifty will always set a high price, no matter Speedy's choice.
4. Swifty will always set a low price, no matter Speedy's choice.