Chapter 65, Problem 7MCQ

To determine

The correct option when both players have a dominant strategy.

Answer to Problem 7MCQ

From the available options, the correct option is that the players will follow a cooperative strategy.

Explanation of Solution

The dominant strategy is the best course of action for a player regardless of what the other players do and when both players make the best movements possible while also considering their opponent's moves, the game would be in Nash equilibrium. It means in this case, there would be no multiple Nash equilibrium and dominant strategy equilibrium.

But none of the actors win or lose against one another when they both have a dominant strategy. They each decide on the single best outcome that is equally beneficial to both parties. Therefore, they follow a cooperative strategy.

Here, the correct option is d (the players will follow a cooperative strategy) and all other options would be incorrect.

Economics Concept Introduction

Introduction: An equilibrium where it is assumed that all players are aware of one another's equilibrium strategies and changing one's own strategy will not help anyone, is called Nash equilibrium.