This means
that there is some other outcome where at least one of the players is better off
while no other player is worse off. However, Pareto domination considers total or
social welfare; this is not relevant to the choice of strategy by each firm.
b. Iterated dominant strategy equilibrium
What would happen if one firm did not have a dominant strategy? This is
illustrated in Table 9.4, which is similar to Table 9.2 but with one payoff
changed. Coke now gets a payoff of 80 instead of 50 if both firms maintain
price. Although Pepsi’s dominant strategy is unchanged, Coke no longer has a
dominant strategy. If Pepsi maintains price it is better off maintaining price,