Suppose the table below represents the payoff matrix for two firms in duopoly, who are “noncooperative.” Which one of the following statements is true?

Question

Suppose the table below represents the payoff matrix for two firms in duopoly, who are “noncooperative.”  Which one of the following statements is true?

BlackTom AI · Accepted Answer

The question as provided mentions a payoff matrix for two noncooperative firms and asks which statement is true, but it does not include the actual payoff data or the list of answer options that would allow evaluation.

Key point: in order to assess whether a statement like “Choosing to advertise would make Firm A better off, regardless of what Firm B does, than would choosing not to advertise” is true, we would need the payoff matrix entries to compare Firm A’s payoffs under the two actions (advertise vs not advertise) across both possible actions by Firm B (advertise or not advertise). Without those four numbers, we cannot determine if advertising is a dominant strategy for Firm A.

What this means for the analysis:
- If we had the matrix, we would check whether the payoff for Firm A when it advertises is higher than the payoff when it does not advertise for both of Firm B’s possible choices. If yes, advertising would be a dominant strategy for Firm A, and the statement would be true.
- If the matrix showed that advertising benefits Firm A only when Firm B also advertises or only when Firm B does not advertise (but not in both cases), then advertising would not be a dominant strategy, and the statement would be false.

Additionally, the absence of answer options complicates things further:
- Without the list of alternatives, we cannot contrast the given statement against the other possible claims about dominance, best responses, or Nash equilibrium in the duopoly.
- If the problem intends to test the concept of dominant strategies, the matrix must be present so that we can verify whether Firm A has a strictly higher payoff from advertising across all of Firm B’s actions.

In summary, with the payoff data and the full set of answer choices missing, we cannot conclusively judge the truth value of the provided statement. To proceed, one would need (1) the four payoff numbers that constitute the 2-by-2 matrix and (2) the complete list of answer options to compare.

ECON 2010-001 Spring 2025 Module 15 Application Problems (monopolistic competition & oligopoly)

Suppose the table below represents the payoff matrix for two firms in duopoly, who are “noncooperative.” Which one of the following statements is true?

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