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Helton Hotels, a major hotel chain, and Beautiful Burgers, a popular chain of burger restaurants, have agreed on a joint venture, where Beautiful Burger restaurants
Helton Hotels, a major hotel chain, and Beautiful Burgers, a popular chain of burger restaurants, have agreed on a joint venture, where Beautiful Burger restaurants will be placed within Helton hotel properties. They each have to decide whether to make a small ($5 million) or large ($10 million) investment in the joint venture. These investments will not be observable by the other party until after the restaurants are opened, at which stage it will be too late to make any changes. Because their investments in the project are complementary, if both make a large investment, they will earn $40 million in revenue, while if at least one makes a small investment, they will earn only $24 million in revenue from the venture. In either case, they have agreed to split the revenue equally. Their prots in all possible scenarios is represented by the following payoff matrix. (Beautiful Burgers' payoffs and strategies are depicted in italics.) Beautiful Burgers Small Large Helton Small 7, 7 7,2 Hotels Large 2, 7 10, 70 Which of the following strategy proles are Nash equilibria ofthis game? 0 a. None of these are Nash equilibria. O b. Both (Large, Small) and (Small, Large) 0 c. (Large, Large) only 0 d. Both (Small, Small) and (Large, Large) 0 e. (Small, Small) only
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