payoff/Firm B’s payoff) Firm B Firm A Price £2 Price £1 Price £2 £20,000/£20,000 £10,000/£24,000 Price £1 £24,000/£10,000 £12,000/£12,000 Assume you are the pricing manager at Firm A; i) What is your payoff for a ‘maximin’ strategy? ii) What is your payoff for a ‘maximax’ strategy? iii) Does a dominant strategy exist within this prisoners’ dile

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s
payoff/Firm B’s payoff)
Firm B
Firm A
Price £2 Price £1
Price £2 £20,000/£20,000 £10,000/£24,000
Price £1 £24,000/£10,000 £12,000/£12,000
Assume you are the pricing manager at Firm A;
i) What is your payoff for a ‘maximin’ strategy?
ii) What is your payoff for a ‘maximax’ strategy?
iii) Does a dominant strategy exist within this prisoners’ dilemma?

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