GAME THEORY AND OLIGOPOLY.Profit payoff Matrix for Home Depot and Rona.Below is the profit payoff matrix for these two building supply stores on whether they set their plywood price HIGH or LOW

TABLE 1

Rona LOW price

Rona HIGH price

Home Depot LOW price

$40 million for Rona

$38 million for Home Depot

$45 million for Rona

$30 million for Home Depot

Home Depot HIGH price

$30 million for Rona

$30 million for Home Depot

$35 million for Rona

$39 million for Home Depot

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Using Table, what if any is thecollusive outcome?Explain whether it will occur.

Using Table, what if any is theNash equilibrium?Explain whether it will occur.

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Second table:

TABLE 2

Rona LOW price

Rona HIGH price

Home Depot LOW price

$21 million for Rona

$21 million for Home Depot

$36 million for Rona

$15 million for Home Depot

Home Depot HIGH price

$15 million for Rona

$36 million for Home Depot

$24 million for Rona

$24 million for Home Depot

What is meant by a dominant strategy?Using Table 2, is there adominant strategy?Explain if there is a Nash equilibrium and a collusive equilibrium?