Suppose that two of the world’s leading breakfast cereal producers, Kellogg and General Mills (GM), both based in the USA, face a duopoly market. Also suppose that they both plan to introduce two new types of cereal (diet and sweet), one each by Kellogg and GM, which will be successful if only one of them produce a particular type. Suppose again that a previous variant of diet cereals produced by GM was not as popular among customers as that produced by Kellogg. If both produce the same type, the market will be glutted with this type of cereal and the payoffs they gain are assumed to be considerably small. The strategies and the associated payoffs (in millions of dollars) of these two companies are given in Table 7.2.13. Determine the strictly dominant or dominated strategies, if any, in this game. What will be the equilibrium of the game?
