Game Theory Lab

A few large firms watch each other: what one should do depends on what the other does. A payoff matrix lays the choices out. Each player compares its own payoffs, holding the other's choice fixed. A strategy that wins both comparisons is dominant; a cell where neither player gains by switching alone is a Nash equilibrium, and a game can have one, two or none.

How this lab works

Explore: pick a game and tap any cell to test it: the lab says whether either firm would switch, and by how much. Show a firm's best responses to see its two comparisons marked on the matrix, and the verdict: a dominant strategy, or none. Move the tax or subsidy slider to change one firm's payoffs and watch the equilibrium move.

Test yourself gives a new game each time: mark dominant strategies and pick the argument a reader scores (both comparisons, with the numbers), tap every Nash equilibrium and the joint-payoff cell, find a best response, and redo the game after a tax or subsidy. A wrong answer names the slip: the largest single payoff taken for a dominant strategy, one comparison only, a missing equilibrium, or the joint-payoff cell taken for an equilibrium.

In every matrix the row player's payoff is listed first.

Notes for this topic: Oligopoly and Game Theory