Collusive outcome versus Nash equilibrium Suppose there is a remote stretch of highway along which two restaurants, Last Chance Caf ?and Desolate Diner, operate in a duopoly. Neither restaurant invests in keeping up with health code regulations, but regardless they both have customers as they are the only dining options along a 79 ?mile portion of the road. Both restaurants know that if they clean up and comply with health codes they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $13,000; alternatively, if they both hire workers to clean, each will earn only $10,000. ?However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $17,000, ?and the other restaurant will make only $5,000. ?Complete the following payoff matrix using the information just given. (Note: Last Chance Cafe and Desolate Diner are both profit-maximizing firms.) ?Desolate Diner If Last Chance Caf ?and Desolate Dinr decide to collude, the outcome of this game is as follows: Last Chance Caf ?Diner ? ?and Desolate If both restaurants decide to cheat and behave noncooperatively, the outcome reflecting the unique Nash equilibrium of this game is as follows: Last Chance Caf?, ?and Desolate Diner ?

A. Collusive outcome versus Kash equilibrium Suppose there is a remote stretch of highway along which two memurants, Last Chance Cafe and Desolate Dines operate in a dugpoly. Neither toolsand invests in keeping up with health code regulation, but regaldies they both have customers as they are the only dining optomaking a 79 mile portion of the road. Both reaurants know that if they dean up and comply with heath codes they will attract more customers, but this algo means that they will have to pay workers to do the cleaning If neither restaurant deans, each will own $13,000; alternatively, if they both hire workers to loan, each will cam only $10,070. However if one cleans and the other docan't, mers customers will choose the cleaner restaurant; the dainer restaurant will make $17,030, and the other restaurant willmake only $5,004. Complete the following payoff matrix using the wormnation just given (Note: Last Chance Cafe and [isolate Diner are both profit -mawamazing forms.) Desola Diner Docan't Ciran Up Last Chance Cre Doesn't Gean Up If Lest Chance Cale and Desolate Diref deade to collude, the putcare of this game as as follows Last Chance Cale Diner If both restaurants decide be cheat aid behave noncooperatively, the outcome feeding the unique Nash equilibrium of this game is as follows: Last Chance Cafe and Desolate Dinner