Han solo and buba fettare the only two smugglers in the western reaches. they have been colluding, sharing the market and earning monopoly profits of $100,000 each for several years. bubba fett is considering reducing his price. he estimates that if han solo keeps his price at current levels, bubba fettwould earn $150,00,although han solo’s earnings would fall to $25,000. there is also the possibility that han solo would compete against bubba fett. the resulting price war would reduce the earnings of each to $40,000.a. set up a payoff matrix above with han solo on top. b. is there a dominate strategy for either plyer? if so, what is it for each person? c. what is the nash equilibrium outcome? explain the intuition behind this.

A dominant strategy is when the strategy is best for best for one player. It doesn't have to be best for the other,

Nash equilibrium is when each player has no incentive to change their option.

Payoff Matrix:

                                                                           Han Solo

                                                  Same Price                                  Reduce Price

Buba Fettare   Same Price      100,000/100,000                  25,000/150,000        

                        Reduce Price   150,000/25,000                    40,000/40,000

Nash Equilibrium would be that both Han Solo and Buba Fettare would keep the same price.

Dominant strategy for each player is to reduce price but if both reduce then there is no dominant strategy.

i think the answer to your question is b. directive

c is the correct answer.