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Consider a remote town in which two restaurants, AllYouCanEat Cafe and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but

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Consider a remote town in which two restaurants, AllYouCanEat Cafe and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, 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 $14,000; alternatively, if they both hire workers to clean, each will earn only $11,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $18,000, and the other restaurant will make only $6,000. Complete the foiiowing payoff matrix using the information just given. (Note: AilYouCanEat Cafe and GoodGrub Diner are both profitmaximizing firms.) GDOdGrub Diner Cleans Up Doesn't Clean Up Cleans Up $ ,|$ l$ I. '35 All-You-Can-Eat Caf Doesn'tClean Up [$ ], [$ J [$ J. '95 ] If AllYouCanEat Cafe and GoodGrub Diner decide to collude, the outcome of this game is as follows: AllYouCanEat Cafe V and GoodGrub Diner V . If both restaurants decide to cheat and behave noncooperatively, the outcome reecting the unique Nash equilibrium of this game is as follows: All YouCanEat Cafe V , and GoodGrub Diner V

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