Two firms in a market sell identical goods and charge a price ofâ $5 per unit.â However, the cost of a crucial input used in producing these goods has increased. As aâ result, both firms are considering increasing the price of the good toâ $6. If the firms do not raise their prices at the sameâ time, the firm that raises the price stands to lose market share. The payoff matrix shows their respective payoffs on the basis of the prices charged by them.â Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player and the second number listed is the payoff to the column player. Firm 2
Price = $5 Price = $6
Firm 1 Price =$5 50 100
50 0

Price =$6 0 40
100 40

Which of the following is true in thisâ case?

a. Firmâ 2's dominant strategy is to chargeâ $6.
b. Firmâ 1's dominant strategy is to chargeâ $6.
c. Firmâ 1's dominant strategy is to chargeâ $5.
d. This game does not have a dominant strategy equilibrium.