The trick is to compare across
the firm’s strategies!
Airtouch has no dominant strategy because it’s better off with a morning departure if Windward chooses a morning
chooses a morning departure, but it’s better off with an evening departure if Windward chooses an evening departure. No particular strategy proves to be consistently superior.
Again, we compare A
i
across the firm’s strategies!
Windward DOES have a dominant strategy because it’s better off with a morning departure regardless of whether
regardless of whether Airtouch chooses a morning or an evening departure. This one particular strategy proves to be consistently superior.
If both firms know all of the information in the payoff matrix
information in the payoff matrix, then they will logically choose to leave in the morning. This is because Windward will leave in the morning no matter what
the morning no matter what (that’s their dominant strategy). Knowing this, Airtouch will choose to leave in the morning in this case because that is the
this case because that is the option that gives them the most profit in that scenario. Airtouch
will earn $1,000.00, and Windward will earn $700 00
Windward will earn $700.00.