(Table) Referring to the Payoff Matrix for Norm and Pete

question 94

Multiple Choice

(Table) Referring to the payoff matrix for Norm and Pete (with Norm's profit in plain text and Pete's profit in italics) , who has a dominant strategy?
$\begin{array}{c} \quad \quad \quad \quad \quad \quad \quad \text { Pete's Pasta Dinners } \\\begin{array}{|l|l|ll|ll|}\hline & & {\text { High Price }} & &{\text { Price }} \\\hline \text {Norm's Noodle Bowls } & \text { High Price } & \$ 4,000 & \$ 4,500 & \$ 700 & \$ 3,500 \\\hline &\text { Low Price } & \$ 2,800 & \$ 500 & \$ 3,000 & \$ 3,700 \\\hline\end{array}\end{array}$

• A) both Norm and Pete
• B) neither Norm nor Pete
• C) Norm, but not Pete
• D) Pete, but not Norm

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Definitions:

Moral Hazard

A situation where one party engages in risky behavior or lacks incentive to guard against risk because another party bears the consequences of that behavior.

Risk Efficiently

The optimal management of risk to maximize returns relative to the level of risk taken.

Flood Insurance

A type of insurance policy that covers property loss and damage due to flooding, often required in high-risk flood areas.

Flood Plains

Flat areas adjacent to rivers and streams that are subject to periodic flooding, often characterized by fertile soil.