) Suppose that New Deer and John Holl-And, the only two manufacturers of agricultural equipment, are trying to determine whether to charge a “high” or a “moderate” price for similar machinery.
The profits for both manufacturers are shown in the following matrix, where New Deer’s payoffs are reported on the lower left-hand side corner of each cell, and John Holl-And’s payoffs are reported on the upper right-hand side corner of each cell.
John Holl-And High Price Moderate Price New Deer High Price $0.
8 billion $1.
4 billion $0.
6 billion $0.
9 billion Moderate Price $0.
5 billion $1.
9 billion $0.
7 billion $1.
1 billion a.
) Determine whether New Deer has a dominant strategy.
If so, what is New Deer’s dominant strategy? b.
) Determine whether John Holl-And has a dominant strategy.
If so, what is John Holl-And’s dominant strategy? c.
) Explain what will be the equilibrium outcome of the game.
) Explain New Deer’s dominant strategy and the outcome of the game if New Deer is the clear leader in the agricultural equipment industry.