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

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
5
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
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
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Nash Equilibrium
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education