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Best Response (in Game Theory)
Dominant Strategy
In game theory, a dominant strategy is an action that yields the highest payoff for a player, regardless of the strategies chosen by the other players. When a player has a dominant strategy, their best response remains the same for every possible action their opponent might take.
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Introduction to Microeconomics Course
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Determining Anil's Best Response if Bala Chooses Rice
Finding Best Responses
Dominant Strategy
Two competing firms, Firm A and Firm B, must simultaneously decide whether to 'Launch a new product' or 'Maintain the current product line'. The resulting profits for each firm depend on the actions of both, as shown in the following payoff structure, where the first number in the parentheses is Firm A's profit and the second is Firm B's profit:
- If both firms Launch: (50 million)
- If Firm A Launches and Firm B Maintains: (30 million)
- If Firm A Maintains and Firm B Launches: (100 million)
- If both firms Maintain: (80 million)
Given this information, if you know that Firm B has decided to 'Launch a new product', what is the best response for Firm A to maximize its own profit?
Two competing coffee shops, The Daily Grind and Brew & Co., are deciding on a daily promotion. The table below shows the daily profit (in dollars) for each shop based on the combination of strategies they choose. The first number in each pair is The Daily Grind's profit, and the second is Brew & Co.'s profit.
Payoff Matrix:
Brew & Co: Latte Discount Brew & Co: Muffin Combo Brew & Co: No Special Grind: Latte Discount (100) (80) (90) Grind: Muffin Combo (140) (120) (50) Grind: No Special (220) (180) (140) Match each of Brew & Co.'s potential strategies to The Daily Grind's best response to maximize its own profit.
Roommate Chore Dilemma
Farmer's Irrigation Choice
Two roommates, Alex and Ben, must decide independently whether to 'Clean' their shared apartment or 'Relax'. The satisfaction they each get from their decision depends on what the other person does, as shown in the payoff table below. The first number in each cell is Alex's satisfaction score, and the second is Ben's.
Ben: Clean Ben: Relax Alex: Clean (8, 8) (3, 10) Alex: Relax (10, 3) (0, 0) Statement: If Ben decides to 'Clean', Alex's best response is also to 'Clean'.
Determining a Best Response
Analyzing Strategic Choices in a Market Entry Game
Consider the payoff matrix below, which shows the profits (in thousands of dollars) for two competing firms based on their advertising budget decisions. The first number in each cell is the profit for Innovate Corp, and the second is for Tech Solutions.
Tech Solutions: Increase Tech Solutions: Maintain Innovate Corp: Increase (60, 50) (____, 30) Innovate Corp: Maintain (40, 70) (80, 80) If Tech Solutions chooses to 'Maintain' its budget, what is the minimum whole number profit (in thousands of dollars) that must go in the blank to make 'Increase' the best response for Innovate Corp?
A manager at 'Pizza Palace' is trying to decide on a pricing strategy. Their profit depends on the choice made by a competing business, 'Burger Barn'. The manager wants to determine their single most profitable action, assuming they know that Burger Barn has committed to a specific strategy. Arrange the following steps into the logical order the manager should follow to identify their 'best response'.
Evaluating a Strategic Recommendation
Learn After
Bala's Dominant Strategy to Grow Rice
Rice-Cassava Game as a Dominant Strategy Equilibrium
Anil's Dominant Strategy in the Pest Control Game
Bala's Dominant Strategy in the Pest Control Game
Two competing firms, Firm A and Firm B, must simultaneously decide whether to set a high or low advertising budget. The payoff matrix below shows the profits for each firm based on their combined decisions. The first number in each cell is the profit for Firm A, and the second is the profit for Firm B.
Firm B: High Budget Firm B: Low Budget Firm A: High Budget (10, 5) (12, 8) Firm A: Low Budget (8, 6) (9, 4) Based on this information, which of the following statements is true?
Strategic Business Decision
Coffee Shop Competition
Consider the following payoff matrix for two competing firms, Firm Alpha and Firm Beta, which must decide simultaneously whether to launch a major or minor advertising campaign. The first number in each cell represents the profit for Firm Alpha, and the second number represents the profit for Firm Beta (in thousands of dollars).
Firm Beta: Major Campaign Firm Beta: Minor Campaign Firm Alpha: Major Campaign (50, 40) (70, 20) Firm Alpha: Minor Campaign (30, 60) (60, 50) Statement: In this scenario, launching a major advertising campaign is the best choice for Firm Alpha, no matter which action Firm Beta takes.
Analyze the following three payoff matrices representing strategic games between two players. In each cell, the first number is the payoff for Player 1 and the second is for Player 2. Match each matrix to the statement that accurately describes the strategic situation.
Two technology companies, Innovate Inc. and MarketCorp, are deciding whether to launch their new products early or late. The payoff matrix below shows the potential profits (in millions) for each company based on their simultaneous decisions. The first number in each cell is the profit for Innovate Inc., and the second is for MarketCorp.
MarketCorp: Launch Early MarketCorp: Launch Late Innovate Inc: Launch Early (10, 5) (12, 7) Innovate Inc: Launch Late (8, 9) (10, 6) Analyze the matrix to determine which of the following statements accurately describes the strategic situation for the companies.
The Significance of a Dominant Strategy
Analyzing a Strategic Decision
When analyzing a strategic interaction, if a player finds that one particular action provides them with the best possible outcome no matter which action their opponent chooses, that action is known as their ____.
You are analyzing the strategic decisions of AeroCorp. Based on the payoff matrix below, arrange the following logical steps in the correct order to determine if AeroCorp has a dominant strategy. The first number in each cell is the payoff for AeroCorp, and the second is for JetStream.
JetStream: Price High JetStream: Price Low AeroCorp: Price High (100, 80) (70, 90) AeroCorp: Price Low (120, 60) (80, 70)