Suggested Answer to HW7-3(a)

Suggested Answer to HW7-3(a)3. (a)

in the game shown above, neither player has a dominant strategy. Remember that a dominant strategy is one that is always best, whatever the other player chooses to do. In this case, Firm 1 wants to play X if Firm 2 plays X and Y if Firm 2 plays Y. Thus Firm 1 does not have a dominant strategy. What is best depends on what Firm 2 plays. You should be able to see that Firm 2 does not have a dominant strategy either.