# Game Theory for Payoff Tables

The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00.

For questions 1 - 10, provide the correct answer to fill in the blanks. Use the suggested words in parentheses after each blank.

St. Petersburg Times

Low Price

$0.50 High Price

$1.00

Tampa Tribune Low Price

$0.50 A.

$45,000,$30,000 B.

$35,000,$20,000

High Price

$1.00 C.

$40,000,$45,000 D.

$50,000,$40,000

Payoffs in dollars of profit per Sunday edition.

1.

Value:

10.00 points

St. Petersburg Times' dominant strategy is ____________ (low price, high price, it has no dominant strategy).

2.

Value:

10.00 points

Tampa Tribune's dominant strategy is ____________ (low price, high price, it has no dominant strategy).

3.

Value:

10.00 points

St. Petersburg Times' dominated strategy is ____________ (low price, high price, it has no dominated strategy).

4.

Value:

10.00 points

Tampa Tribune's dominated strategy is ____________ (low price, high price, it has no dominated strategy).

5.

Value:

10.00 points

Cell _____ (A, B, C, D) is a Nash equilibrium.

6.

Value:

10.00 points

The Nash equilibrium cell in question 5 _______ (is, is not) a dominant strategy equilibrium.

7.

Value:

10.00 points

Cell A ________ (is, is not) strategically stable.

8.

Value:

10.00 points

Cell B ________ (is, is not) strategically stable.

9.

Value:

10.00 points

Cell D ________ (is, is not) strategically stable.

10.

Value:

10.00 points

This newspaper pricing decision ________ (is, is not) a Prisoners' Dilemma.

https://brainmass.com/economics/game-theory/game-theory-payoff-tables-611246

#### Solution Summary

The solution provides detailed explanation to each sub-question. It explains the economic theory behind each choice and how the equilibrium is reached.