Question

Do Not Change Subscription Price Increase Subscription Price

DailyVoice Do Not Change Subscription Price $500, $400 $200, $700
Increase Subscription Price $600, $300 $300, $100

The two major newspapers in a city, Daily Voiceand Town Herald, are considering whether to raise the subscription price. The first entries in the matrix above show the profits to Daily Voice, and the second entries show the profits to Town Herald. Which of the following is consistent with the above payoff matrix?

a. Do Not Change Subscription Price is adominant strategy forDaily Voice.
b. Do Not Change Subscription Price is adominant strategy forTown Herald.
c. Increase Subscription Price is a dominantstrategy forDaily Voice.
d. Increase Subscription Price is a dominantstrategy forTown Herald.
e. There are no dominant strategies in the abovepayoff matrix

Answer 1

Answer:

e. There are no dominant strategies in the above payoff matrix

Explanation:

a) Payoff matrix

                                                Do Not Change        Increase Subscription

                                              Subscription Price              Price                                              

Do Not Change Subscription

                 Price                        $500      $400            $200     $700

Increase Subscription Price    $600       $300           $300      $100

The players in the matrix payoff game are Daily Voice and Town Herald.

b) There is no dominant strategy that absolutely favors either Daily Voice or Town Herald in this matrix.  A dominant strategy will exist if one party is always better off under a particular strategy regardless of the strategy the other party chooses.