In an isolated town, two pizza shops open. Their owners Mario and Luigi are deciding what price to set on the menu. Before the opening night of both stores they discuss their pricing and work out that a price of $15 is going to bring the greatest benefit to them. Both know that there are 100 potential customers on any given night and that if one of them were to decrease their price to $14, then everyone would buy from their shop. Otherwise, the customers will be evenly split between the two shops. Producing a pizza costs each shop owner $10.

A. Draw the payoff matrix of the game for the first day of opening.

B. What is the equilibrium of this game? What equilibrium concept did you use to find this equilibrium (for example: Nash Equilibrium, Dominant Strategies)? Does this game resemble any of the types of games introduced in the course?

C. Suppose that changing the price of pizza costs the shop owner $170 because new menus must be printed. Reconstruct the payoff matrix of the game using the above information and explain whether any of the key features (equilibrium concept, equilibrium, type of game) have changed.

D. Suppose instead that Mario and Luigi write their prices on a chalkboard that is costless to change (as in the original case). However, the Organization of Pizza Shop Owners announces that it is creating a new rule that all pizza shops must print paper menus "for the convenience of the customers" and abide the prices printed on the menus. If you were advising the local consumer advocacy group, would you support this rule? Explain why or why not.