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2. Breadbasket and Quicklunch are the only two sandwich shops serving a small town. Each shop can choose to set a high price or a
2. Breadbasket and Quicklunch are the only two sandwich shops serving a small town. Each shop can choose to set a high price or a low price for sandwiches. The payoff matrix below shows the daily profits for each combination of prices that the two shops could choose. The first entry shows Breadbasket's profits, and the second entry shows Quicklunch's profits. Assuming that both shops know the information shown in the matrix, answer the following. Quicklunch High Price Low Price High Price $105, $110 $40, $130 Breadbasket Low Price $120, $80 $75, $70 (a) Does each shop have a dominant strategy to set a high price, a dominant strategy to set a low price, or does it have no dominant strategy? (i) Breadbasket (ii) Quicklunch (b) If the two shops do not cooperate on setting prices, what will be the profit for each shop? (i) Breadbasket (ii) Quicklunch
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