Therefore, given the payoffs in Table 9.1, it is obvious that there is a dominant
strategy equilibrium, meaning that the strategies pursued by all players
are dominant. Inthe situationinTable 9.2 both firms will discount, regardless of
the fact that they will both be worse off than if they had maintained prices. By
individually pursuing their self-interest each firmis imposing a cost on the other
firm that they are not taking into account. It can therefore be said that in the PD
situation the dominant strategy outcome is Pareto dominated