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AP Microeconomics/Unit 4: Imperfect Competition
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Changing a Dominant Strategy

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Two competing retailers have profit payoffs (in tens of thousands of dollars) based on their pricing strategies, listed as (Retailer 1, Retailer 2): (8, 8) if both price high; (2, 10) if Retailer 1 prices high and Retailer 2 prices low; (10, 2) if Retailer 1 prices low and Retailer 2 prices high; and (5, 5) if both price low. What is the minimum rebate a supplier must offer to a firm for choosing the high-price strategy to make that strategy dominant?

A

$30,001

B

$30,000

C

$50,000

D

$20,000

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