Problem: Game theory
Consider the following one-shot simultaneous game:
|
|
Firm B
|
|
D
|
E
|
F
|
|
Firm A
|
A
|
6,8
|
25,4
|
27,1
|
|
B
|
5,23
|
23,20
|
26,8
|
a) State all the dominated strategies in the full game, by which strategy they are dominated, and whether weakly or strictly. What is the equilibrium outcome by dominance (by elimination of dominated strategies), if any?
b) Assume Firm A is the leader and Firm B the follower. Solve the game by backwards induction. Is the leadership an advantage or disadvantage for firm A compared to the simultaneous game? Explain.