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    Game Theory for Payoff Tables

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    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.

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

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    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.

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