Micro Unit 4, Question 15: Game Theory + Puppies

The video tutorial explains how to read a chart to determine dominant strategies in game theory. It discusses the pricing strategies of two firms, identifying that Firm 1 has a dominant strategy of always pricing high, while Firm 2 does not have a dominant strategy. The tutorial uses examples to illustrate these concepts, emphasizing the importance of choosing strategies based on potential outcomes.

What is the profit for Firm 2 if both firms decide to price low?

• $15

• $20

• $5

• $10

What is a dominant strategy in game theory?

• A strategy that should be chosen regardless of the opponent's actions

• A strategy that is chosen randomly

• A strategy that depends on the opponent's actions

• A strategy that changes based on market conditions

Why should Firm 1 always choose to price high?

• Because it is a random choice

• Because it matches Firm 2's strategy

• Because it minimizes losses

• Because it maximizes profit regardless of Firm 2's pricing

What profit does Firm 2 prefer when Firm 1 prices high?

• $50

• $60

• $70

• $90

Does Firm 2 have a dominant strategy?

• No, it never prices high

• Yes, it always prices high

• Yes, it always prices low

• No, it sometimes prices high and sometimes low