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A town's two gas stations are each considering lowering prices to attract more sales. How this affects the profits for each gas station depends on
A town's two gas stations are each considering lowering prices to attract more sales. How this affects the profits for each gas station depends on whether the other station also lowers prices. The decision matrix in the figure below shows the payoffs, depending on what each player decides to do. Suppose both gas stations lower their prices and they find themselves in the worst-case scenario in which both have also lowered their profits. Now suppose gas station A announces in an advertisement that it is committed to keeping the new low prices. Gas station A would make this step to: multiple choice signal a long term commitment to lower prices regardless of station B's decision. signal a tit-for-tat strategy to station B. signal a commitment strategy to high prices to station B. make sure that station B does not raise their prices unilaterally. After this announcement, the expected payoff is $ for station A and $ for station B
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