Question

BigBax and CheapStore are the only two firms in a market. Each firm must decide whether to price high or price low. The payoffs from each strategy combination are shown to the right-in millions of dollars. The first number in each pair is BigBox's profit, the second is CheapStore's profit Price Low Price High-.. Cheap Store $400 $600 For BigBox, the dominant strategy in this game is to This is the dominant strategy because t is the strategy that will resuit in BigBox receiving the highest possible profit, $600 O A. $400 0 B, it is the only action that an olgopolist would ever take. $20 $80 O c. tis the stralagy that will allow the frms to cooperate and receive the highest total profit it is the best action for BigBox, no matter what CheapStore does O D. $600 $80

Answer 1

The dominant strategy of Big box is Price Low.

Explanation:

When Cheap store chooses high price the best strategy of big box is to choose low price as higher payoff from choosing low prices (600> 400)  and when cheap store chose low price, the best strategy of Big box is to choose Low price (as 80>20).

The correct option is (D). it is the best action for BIgBox, no matter what Cheapstore does.