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    Analysis of a payoff matrix for a dominant strategy

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    The Candle Corporation and the Wick Company are the only producers of a very sophisticated type of flammable material. They each can engage in either a high or low level of advertising in trade journals. The payoff matrix is as follows:

    Wick Company
    Low Level High Level
    Candle
    Corp. Low Level Wick - $13 million Wick - $12 million
    Candle - $12 million Candle - $11 million

    High Level Wick - $12 million Wick - $11 million
    Candle - $13 million Candle - $12 million

    a. Will Candle engage in a high or a low level of advertising in trade journals?

    b. Will Wick engage in a high or a low level of advertising in trade journals?

    c. Is there a dominant strategy for each firm?

    © BrainMass Inc. brainmass.com December 24, 2021, 7:41 pm ad1c9bdddf
    https://brainmass.com/economics/game-theory/analysis-payoff-matrix-dominant-strategy-210559

    SOLUTION This solution is FREE courtesy of BrainMass!

    To solve through this type of question you begin by seeing if each player has a dominant strategy.

    First, suppose Wick chooses Low...it follows that Candle Corps Best response is to choose High
    since $13 is a better payoff than $12

    now, suppose Wick chooses High...it follows that Candle Corps Best response it to choose High
    since $12 is a better payoff than $11

    SO CANDLE CORP HAS A DOMINANT STRATEGY OF "HIGH LEVEL"

    Next, suppose Candle Corp chooses Low...it follows that Wick's Best response is to choose Low
    since $13 is a better payoff than $12

    now, suppose Candle Corp chooses High...it follows that Wick's Best response it to choose Low
    since $12 is a better payoff than $11

    SO CANDLE CORP HAS A DOMINANT STRATEGY OF "LOW LEVEL"

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 7:41 pm ad1c9bdddf>
    https://brainmass.com/economics/game-theory/analysis-payoff-matrix-dominant-strategy-210559

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