Suppose that New Deer and John Holl-And, the only two manufacturers of agricultural equipment, are trying to determine whether to charge a "high" or a "moderate" price for similar machinery. The profits for both manufacturers are shown in the following matrix, where New Deer's payoffs are reported on the lower left-hand side corner of each cell, and John Holl-And's payoffs are reported on the upper right-hand side corner of each cell. John Holl-And High Price Moderate Price New Deer High Price $0.8 billion $1.4 billion $0.6 billion $0.9 billion Moderate Price $0.5 billion $1.9 billion $0.7 billion $1.1 billion
a. Determine whether New Deer has a dominant strategy. If so, what is New Deer's dominant strategy?
b. Determine whether John Holl-And has a dominant strategy. If so, what is John Holl-And's dominant strategy?
c. Explain what will be the equilibrium outcome of the game.
d. Explain New Deer's dominant strategy and the outcome of the game if New Deer is the clear leader in the agricultural equipment industry.