Question

Question 4 4 pts Phillis Morgan Co. and J.R.Remmington sell death sticks in night clubs. If both firms follow a dominant strategy, then Phillis's profits (losses) will be J.R.concedes that death sticks causes spleen J.R. argues that there is no evidence that death sticks cause spleen cancer cancer Phillis profit = $-50 J.R. profit = $-5 Phillis concedes that death Phillis profit = $-20 sticks cause spleen cancer J. R. profit= $-15 Phillis argues that there is Phillis profit - $-5 no evidence that death J.R.profit = $-50 sticks cause spleen cancer Phillis profit = $-10 J.R. profit = $-10 $-50 $-15 $-5 $-20 $-10

Answer 1

Dominant strategy is the course of action that results in the highest payoff for a firm

By looking at the table

Phillis has dominat strategy when he chooses second row "Phillis argues that there is no evidence that death sticks causes spleen cancer" where the loss is minimum for both case i.e $-5 , $-10

Similarly J.R. has dominat strategy when he chooses second column "J.R. argues that there is no evidence that death sticks causes spleen cancer" where the loss is minimum for both case i.e $-5 , $-10.

	J.R.	J.R.
PHILLIS	A1,B1	A1,B2
PHILLIS	A2,B1	(-10,10)A2,B2

We can create above table and can say (A2,B2) will be the option for both firm.

Answer will be $-10

Please feel free to ask in case of any doubt.