Question

Refer to the payoff matrix. bob's burgers and sam's sandwiches are competing restaurants in a small town. both are considering adding pizza to their line of products. if this is a one-time simultaneous game:
a. both firms have a dominant strategy to add pizza to their menu.


b. both firms have a dominant strategy to not add pizza to their menu.


c. a nash equilibrium occurs either when both add pizza or both do not add pizza.


d. neither firm has a dominant strategy.

Answer 1

Answer:

the correct answer is the option D: neither firm has a dominant strategy

Explanation:

To begin with, if both firms decides to add pizza to their menu then they both will be competing with that new item in the market and therefore that none of them will be dominant due to the fact that both are now producing and selling the good. Moreover, it is not a nash equilibrium due to the fact that it is not stated if the players know the other one strategy and even though that the best strategy to take in order to establish one's dominance is to add pizza to the menu, what happens here is that both take that strategy making it in a situation where both tried their best to improve their situation and ended up using the same strategy.