Suppose you are two restaurants (Subway and Quizno's) that compete for customers. Subway and Quizno's must decide whether to advertise or not (or how
Suppose you are two restaurants (Subway and Quizno's) that compete for customers. Subway and Quizno's must decide whether to advertise or not (or how much). Below are the payoffs from using advertising versus not using it. Suppose both companies do not use advertising, then Subway would make $10 dollars and Quizno's would make $10 (Quizno's payoffs are the bottom left triangles in each square and Subway's payoffs are in the top right triangles). Using the payoff matrix (table) below answer the following questions: a. Who are the players and what are their possible strategies? Is this a constant or a non constant game? b. Does either firm have a dominant strategy? Is there a Nash equilibrium or a prisoner's dilemma (or both)? Explain. c. What are the maxi-max and maxi-min strategies for each player? No Ads Quizno's Ads $10 $15 No Ads $10 $0 Subway SO $5 Ads $15] $5
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