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Game Theory: Inside Oligopoly

In a two play, one shot simultaneous-move game each player can choose strategy A, each earns a payoff of $500. If both players choose strategy A, each ears a payoff of $500. If both players choose strategy B, each earns a payoff of $100. If player 1 chooses strategy A and player 2 chooses strategy b, then player 1 earns $0 and player 2 earns $650. If player 1 chooses stretegy B and player 2 chooses strategy a, then player 1 earns $650 and player 2 earns $0.

A. write the above game in normal form.
B. Find each players dominant strategy, if it exists.
C.Find the Nash equilibrium of this game
D.rank strategy pairs by aggregate payoff (highest to lowest)
e. Can the outcome with the highest aggregate payoff be sustained in equilibrium? Why or why not?

Solution Preview

A.
Player 2 Choose A Player 2 Choose B
Player 1 Choose A 500, 500 0, 650
Player 1 Choose B 650,0 100,100

B. for each player, the strategy B is the ...

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