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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?

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    https://brainmass.com/economics/game-theory/analysis-payoff-matrix-dominant-strategy-210559

    Solution Preview

    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 ...

    Solution Summary

    Given a payoff matrix this solution shows how to solve through and determine if each firm has a dominant strategy and what that strategy is.

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