1. In a small town two retailers A and B are competing for business. They have one store each. Under current conditions they share the total sales of $600,000 equally. Retailer-A is planning to open one or two more stores, or may continue with the existing store (no new stores). Retailer-B can open only one additional store, or may continue with the existing store (no new stores). Each new store costs $40,000 to build. If they have the same number of stores the retailers will share the total sales equally; if one retailer has one more store than the other it will have 60% of the total sales; if one retailer has two more stores than the other one it will have 65% of the total sales. Create the game matrix of this two-person game showing the possible actions and payoffs.

1. Find the optimal values of x and y using the graphical solution method:

Max 3x + 2y

subject to: x 7

y 6

x + y 8

x 0, y 0

1. Find the optimal values of x and y using the graphical solution method:

Min x + y

subject to: x + y 7

5x + 2y 20

x 0, y 0