Poland Spring and Badger Clear are two producers that supply…
Poland Spring and Badger Clear are two producers that supply water in the Madison market. The profit of each producer depends on the price the other producer decides to charge; each firm can either charge a high price or a low price. The following payoff matrix represents the potential profits of the two producers. Badger Clear High Price Low Price Poland Spring High Price $10,000; $10,000 -$1,000; $25,000 Low Price $25,000; -$1,000 $5,000; $5,000 a. Given the strategies and payoffs for each firm, the Nash equilibrium is reached when Poland Spring charges price and Badger Clear charges price. b. Each firm has two strategies available. What is the dominant strategy for Badger Clear? Answer: