Use the Information in the Following Table, Which Summarizes the Payoffs

question 62

Essay

Use the information in the following table, which summarizes the payoffs i.e., profit) to two firms that must decide between an average-quality and a high quality product, to answer the questions that follow:
Firm 2
$$\begin{array} { | c | l | c | c | } \hline & & \text { Average Quality } & \text { HighQuality } \\\hline \text { Firm 1 } & \text { AverngeQunlity } & 600,600 & 400,1100 \\\hline & \text { HighQuality } & 1100,400 & 900,900 \\\hline\end{array}$$ a. What is each player's dominant strategy? Explain your reasoning.
b. Referring to the table above, is this an example of a prisoner's dilemma game? Why or why not?
c. Is there a Nash equilibrium? If so, what is it?

---

Definitions:

Hypotheses

Proposed explanations or predictions that are based on limited evidence as a starting point for further investigation.

Level of Significance

The probability threshold under which a null hypothesis is rejected in hypothesis testing, often denoted by alpha.

Null Hypothesis

A statement positing that there is no significant difference or effect, serving as the default assumption in hypothesis testing.

Population Variance

A measure of the spread or dispersion within a dataset, representing the average of squared deviations from the mean.