Papine Campus. The strategies are to "Enter" or "Don't Enter". If either firm plays Don't Enter, it earns 0 profits. If one firm plays Enter and the other plays Don't Enter, the Firm that plays Enter earns $300,000 per year in profits (Don't enter always yields 0 profits). If both firms choose to play Enter, both lose $100,000 per year as there is not enough demand for two restaurants to make positive profits. The payoff matrix below shows the payoffs for two restaurants BK Don't Enter 3,0 Enter Enter Don't Enter -1,-1 0,3 0,0 Payoffs are in units of $100,000 a. What are the Nash equilibria of this game? b. Is there a mixed strategy Nash equilibrium in game? If so, what is it? c. Calculate the expected Nash equilibrium payoff for KFC and BK respectively
Papine Campus. The strategies are to "Enter" or "Don't Enter". If either firm plays Don't Enter, it earns 0 profits. If one firm plays Enter and the other plays Don't Enter, the Firm that plays Enter earns $300,000 per year in profits (Don't enter always yields 0 profits). If both firms choose to play Enter, both lose $100,000 per year as there is not enough demand for two restaurants to make positive profits. The payoff matrix below shows the payoffs for two restaurants BK Don't Enter 3,0 Enter Enter Don't Enter -1,-1 0,3 0,0 Payoffs are in units of $100,000 a. What are the Nash equilibria of this game? b. Is there a mixed strategy Nash equilibrium in game? If so, what is it? c. Calculate the expected Nash equilibrium payoff for KFC and BK respectively
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:14. Two Firms, KFC and BK must decide whether to put one of their restaurants on UTech
Papine Campus. The strategies are to "Enter" or "Don't Enter". • If either firm plays
Don't Enter, it earns 0 profits. If one firm plays Enter and the other plays Don't Enter, the
Firm that plays Enter earns $300,000 per year in profits (Don't enter always yields 0
profits). If both firms choose to play Enter, both lose $100,000 per year as there is not
enough demand for two restaurants to make positive profits. The payoff matrix below
shows the payoffs for two restaurants
BK
Enter
Don't Enter
Enter
-1,-1
3,0
Don't Enter
0,3
0,0
Payoffs are in units of $100,000
a. What are the Nash equilibria of this game?
b. Is there a mixed strategy Nash equilibrium in game? If so, what is it?
c. Calculate the expected Nash equilibrium payoff for KFC and BK respectively
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