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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please no written by hand

Two supermarkets, Apple Mart and Family Fresh compete against each other. Due to the improvement in AI, they are both are considering switching from Cashier lanes to the use of only Self-check machine lanes. Cost saving, customer response, and the interdependence between their strategies could result in the payoff metrix below. The first entry is for Apple Mart.

i. Determine whether each store has a dominant strategy and state it below. If none, enter NONE:
Apple Mart: _________________________________
Family Fresh: _______________________________
ii. Determine the Nash equilibrium (or equilibria).____________________________________________
iii. What is the interpretation of your answer to ii?

Apple Mart
Cashier
Self-checkout
Cashier
$7 million
$8 million
Family Fresh
$3 million
$7 million
Self-checkout
$6 million
$4 million
$9 million
$5 million

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