Consider a small town that is served by two grocery stores, White and Grey. Each store must decide whether to stay open on Sunday or whether it will lose on that day. If both stores decide to close, then each has monthly profits of $21,000. However, if one is open and the other closed, the open one has profits of $25,000 and the closed store has profits of $17,000. If both remain open on Sundays, then each has profits of $20,000. Why might profits be lower if both are open on Sundays than if both are closed on Sundays? Does either firm have a dominant strategy? Is there a dominant strategy equilibrium? Is there a strategy for joint profit maximizing?
Consider a small town that is served by two grocery stores, White and Grey. Each store must decide whether to stay open on Sunday or whether it will lose on that day. If both stores decide to close, then each has monthly profits of $21,000. However, if one is open and the other closed, the open one has profits of $25,000 and the closed store has profits of $17,000. If both remain open on Sundays, then each has profits of $20,000. Why might profits be lower if both are open on Sundays than if both are closed on Sundays? Does either firm have a dominant strategy? Is there a dominant strategy equilibrium? Is there a strategy for joint profit maximizing?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Consider a small town that is served by two grocery stores, White and Grey.
Each store must decide whether to stay open on Sunday or whether it will lose on that day.
If both stores decide to close, then each has monthly profits of $21,000.
However, if one is open and the other closed, the open one has profits of $25,000 and the closed store has profits of $17,000.
If both remain open on Sundays, then each has profits of $20,000.
- Why might profits be lower if both are open on Sundays than if both are closed on Sundays?
- Does either firm have a dominant strategy? Is there a dominant strategy equilibrium?
- Is there a strategy for joint profit maximizing?
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