(b) Two hotels, Hotel Sandy and Hotel Magda, are competing for a limited number of tourists. The hotels have approval to either expand hotel operations, or add recreational water sports to their offerings. No one hotel has approval do both of these changes. A research company has determined that the following outcomes are likely: If Hotel Sandy expands, and Hotel Magda adds water sports, Hotel Sandy will increase its market share by 1%, and Hotel Magda will increase its market share by 3%. If Hotel Sandy adds water sports, and Hotel Magda expands, Hotel Sandy will decrease its market share by 5%, and Hotel Magda will increase its market share by 2%. If both hotels add water sports, Hotel Sandy will increase its market share by 4%, and Hotel Magda will increase its market share by 5%. If both hotels expand, Hotel Sandy will increase its market share by 2%, and Hotel Magda will decrease its market share by 5%. Given that both hotels employ game theory, what course of action would each hotel take?

(b) Two hotels, Hotel Sandy and Hotel Magda, are competing for a limited number of tourists. The hotels have approval to either expand hotel operations, or add recreational water sports to their offerings. No one hotel has approval do both of these changes. A research company has determined that the following outcomes are likely: If Hotel Sandy expands, and Hotel Magda adds water sports, Hotel Sandy will increase its market share by 1%, and Hotel Magda will increase its market share by 3%. If Hotel Sandy adds water sports, and Hotel Magda expands, Hotel Sandy will decrease its market share by 5%, and Hotel Magda will increase its market share by 2%. If both hotels add water sports, Hotel Sandy will increase its market share by 4%, and Hotel Magda will increase its market share by 5%. If both hotels expand, Hotel Sandy will increase its market share by 2%, and Hotel Magda will decrease its market share by 5%. Given that both hotels employ game theory, what course of action would each hotel take?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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