Displayed Below Is the Payoff Matrix of Firm a for Four

question 64

Multiple Choice

Displayed below is the payoff matrix of firm A for four different strategies, A1, A2, A3, and A4, and the potential retaliatory responses of firm B (B1, B2, B3, B4) .?

If firm A uses the maximin criterion, which strategy will it choose?

• A)A1
• B)A2
• C)A3
• D)A4

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Definitions:

Collusion

An agreement between firms, typically secret, to limit competition among themselves, such as by setting prices or output levels.

Diagram

A simplified drawing showing the appearance, structure, or workings of something in a conceptual or visual form.

Profits

The financial gain realized when the revenue earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Game Theory Matrix

A tabular representation used in game theory to display the payoffs for each player for every possible combination of strategies.