Asked by Andrea Weitoschova on Jul 23, 2024
Verified
Refer to Table 17-7. Which of the following statements is correct?
A) Wonka can potentially earn its highest possible profit if it produces a good quality product, and for that reason it is a dominant strategy for Wonka to produce a good quality product.
B) The highest possible combined profit for the two firms occurs when both produce a poor quality product, and for that reason producing a poor quality product is a dominant strategy for both firms.
C) Regardless of the strategy pursued by Wonka, Gekko's best strategy is to produce a good quality product, and for that reason producing a good quality product is a dominant strategy for Gekko.
D) Our knowledge of game theory suggests that the most likely outcome of the game, if it is played only once, is for one firm to produce a poor quality product and for the other firm to produce a good quality product.
Good Quality Product
A product that meets or exceeds the expectations of its users in terms of performance, durability, and reliability.
Dominant Strategy
A strategy in game theory that yields the best payoff for a player no matter what the other players do.
Combined Profit
The aggregate profit earned by combining the net incomes of two or more entities, businesses, or investment sources.
- Investigate how competitive strategies influence market quality and volume.
Verified Answer
AC
arlene calcenaJul 26, 2024
Final Answer :
C
Explanation :
Gekko's best strategy being to produce a good quality product regardless of Wonka's actions defines a dominant strategy, which is a key concept in game theory indicating the best course of action no matter what the opponent does.
Learning Objectives
- Investigate how competitive strategies influence market quality and volume.