The question is asking which strategy (number of boats sent out by each firm) will survive the iterated elimination of strongly dominated strategies. This is a concept in game theory where less effective strategies are progressively eliminated.

First, let's calculate the profit for each firm, which is revenue minus cost. The revenue is the price times the quantity of fish caught, and the cost is the number of boats times the cost per boat.

Profit = p*(602 + nA + nB) - 12*n

Substituting p = 1, we get:

Profit = (602 + nA + nB) - 12*n

Now, let's consider each possible strategy:

1. (0,0): Both firms send out no boats. The profit for each firm is 0, as no fish are caught and no costs are incurred.

2. (1,1): Each firm sends out one boat. The profit for each firm is 1*(602 + 1 + 1) - 12*1 = 592.

3. (2,2): Each firm sends out two boats. The profit for each firm is 1*(602 + 2 + 2) - 12*2 = 584.

4. Any other combination: The profit will be less than the above strategies, as the cost of sending out more boats outweighs the additional revenue from catching more fish.

From this analysis, we can see that the strategy (1,1) yields the highest profit for both firms. Therefore, the answer is (B) (1,1) is the only outcome that survives the iterated elimination of strongly dominated strategies.

Question

The question is asking which strategy (number of boats sent out by each firm) will survive the iterated elimination of strongly dominated strategies. This is a concept in game theory where less effective strategies are progressively eliminated.

First, let's calculate the profit for each firm, which is revenue minus cost. The revenue is the price times the quantity of fish caught, and the cost is the number of boats times the cost per boat.

Profit = p*(602 + nA + nB) - 12*n

Substituting p = 1, we get:

Profit = (602 + nA + nB) - 12*n

Now, let's consider each possible strategy:

1. (0,0): Both firms send out no boats. The profit for each firm is 0, as no fish are caught and no costs are incurred.

2. (1,1): Each firm sends out one boat. The profit for each firm is 1*(602 + 1 + 1) - 12*1 = 592.

3. (2,2): Each firm sends out two boats. The profit for each firm is 1*(602 + 2 + 2) - 12*2 = 584.

4. Any other combination: The profit will be less than the above strategies, as the cost of sending out more boats outweighs the additional revenue from catching more fish.

From this analysis, we can see that the strategy (1,1) yields the highest profit for both firms. Therefore, the answer is (B) (1,1) is the only outcome that survives the iterated elimination of strongly dominated strategies.

Knowee AI · Accepted Answer