In a game involving two firms in an oligopoly, if both firms have a dominant strategy to set a low price regardless of the competitor's action, what can we conclude about their pricing behavior?

In an oligopoly, when two firms have a dominant strategy to set a low price, it means that each firm believes that no matter what the other firm does, setting a low price will always be the best choice for them. This leads to a situation where both firms will lower their prices, which can result in lower profits for both compared to if they had cooperated and set higher prices. For example, if Firm A and Firm B both decide to sell their products for $10 instead of $15, they attract more customers, but their profits decrease because they are selling at a lower price. Ultimately, this behavior shows how competition can drive prices down in an oligopoly, leading to a scenario where both firms may end up worse off. This illustrates the classic dilemma in game theory, where individual rational choices can lead to a less favorable outcome for all players involved.