Game Theory:There are two hospitals in a local market, True Blue Hospital and Red Stick Hospital.Both hospitals currently have an emergency room that has been experiencing overcrowding.Therefore, each hospital is going to make the following decision: close the emergency room OR expand capacity to meet increased demand (build onto the existing ER to make it bigger).Closing the ER will generate savings, but expanding the ER will allow the hospital to increase revenues from increasing inpatient admissions and procedures from patients visiting the ER.

Two choices: Expand the existing hospital emergency room or close the existing hospital emergency room.

The payoff matrix below shows the total profit for each hospital resulting from the four combinations of strategies, two years after the decisions have been made.Each cell represents the profits for Red Stick hospital and the profits for True Blue hospital.

TrueBlue Hospital

RedStick Hospital

Expand ER

Close ER

Expand ER

Red Stick:$800,True Blue:$800

Red Stick:$950,True Blue:$700

Close ER

Red Stick:$700,True Blue:$950

Red Stick:$900,True Blue:$900

Under which scenario are thecombined profitsof the two hospitals the highest?

Group of answer choices

Red Stick closes the ER and True Blue closes the ER.

Red Stick closes the ER and True Blue expands the ER.

Red Stick expands the ER and True Blue closes the ER.

Red Stick expands the ER and True Blue expands the ER.