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Discuss about the smith dominant strategy

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Reference no: EM131685522

Question: The Jones Company produces a deluxe auto that is powerful and stylish. The Smith Company (the only other manufacturer) produces an ugly but equally powerful car. Each must decide whether to charge a low or a high price, with profits given by:

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Show that Smith's dominant strategy is to charge a low price, which forces the solution into the northeast corner, and that Jones would prefer to be in the northwest corner. Jones tries to get his way by threatening to charge a low price. Assuming that they play the game just once, explain why he cannot possibly win by using this threat.

Reference no: EM131685522

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