QUESTION

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Company $\mathrm{X}$ and Company $\mathrm{Y}$ are the only sellers of a good with no close substitutes. They are each considering whether to open a new store. They project the following daily profit payoff scenarios: \begin{tabular}{|l|c|l|l|} \hline & \multicolumn{3}{|c|}{ Company Y } \\ \hline \multirow{3}{*}{ Company $\mathbf{X}$} & & New Store & No New Store \\ \cline { 2 - 4 } & New Store & $\$ 16, \$ 16$ & $\$ 25, \$ 10$ \\ \cline { 2 - 4 } & No New Store & $\$ 10, \$ 25$ & $\$ 22, \$ 22$ \\ \hline \end{tabular} a. Does Company $X$ have a dominant strategy to open a new store, not open a new store, or no dominant strategy? b. Does Company Y have a dominant strategy to open a new store, not open a new store, or no dominant strategy? c. Assuming no cooperation, what will the profit be for each firm? d. The cost of opening a new store increases by $\$ 5$. Draw a new payoff matrix reflecting the cost increase. e. Assuming no cooperation, what will the profit be for each business after the cost increase?

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JPVA44 The First Answerer