Chapter 26, Problem 8P

To determine

The pay-off matrix of two strategically defendant oligopolistic firms and their dominant strategy.

Concept Introduction:

Oligopolistic Industry: An industry which has few firms selling either identical or differentiated products is marked as oligopolistic. Fewness means interdependence. The firms in the oligopolistic industry are dependent on each other either in terms of pricing or output decisions.

Pay-off Matrix: A pay-off matrix, in the context of game theory, is a tool used to simplify all the possible outcomes of a strategic decision. It is a visual representation of all the possible strategies and all the possible outcomes.

Dominant Strategy: A dominant strategy in game theory is one that will have the best effects, no matter what the opponents or partners do. It is a set of choices that creates the highest balance of reward/risk ratios.