Question

2. Consider a small town that is served by two grocery stores, White and Gray. Each store must decide whether it will remain open on Sunday or whether it will close on that day. Monthly payoffs for each strategy pair are as shown in the table below.

Gray's Choices Open Sundays Closed Sundays $2,000 $4000 Open Sundays $4000 $12,000 White's Choices $8,000 $12,000 Closed Sundays $2,000 $8,000

1. Which firm is the most profitable in this market?
2. Does Gray have a dominant strategy?
3. Is there a dominant equilibrium for both firms?
4. Is the dominant equilibrium profit-maximizing?
5. Is this an example of the prisoner's’ dilemma? Explain.

Answer 1

groy's Choicis Cesn Sudays Sundays wmt's Open Pndarys 12000 000.o 4000 4000 Choicts lsed 8000,8000 Sundlags berh Arms ar eapal prefirakt n makr Deuni ant torahk splayed rupecu otr sbakny set is wheck playno stpakgiy Bopen seandy Srakigyforgays open suday, Ope s bakgi lonant C) a donian ) Nesh Yes kecau bst can k mad betr f Y scudlag an clon en elomple of psonen's dulem m.