In a duopoly, if both firms choose their dominant strategies, what is the likely outcome in terms of market pricing and profits?

In a duopoly, two firms compete in the same market, and each firm has a dominant strategy that they will choose regardless of what the other firm does. When both firms select their dominant strategies, they typically end up setting prices that are lower than they would if they were cooperating, leading to a situation called "price competition. " This means both firms could earn lower profits than they might have achieved if they had worked together to set higher prices. For example, if two fast-food chains decide to heavily discount their meals to attract customers, both may end up with reduced profits because they are competing on price rather than collaborating to keep prices higher. Ultimately, while each firm acts in its own best interest, the result is often a less profitable market for both.