Question
In the small college town of Gowling Breen, Ohio, there are two almost identical pizza places: Tyrone's Pizza and Jade's Pizza. They only serve slices
In the small college town of Gowling Breen, Ohio, there are two almost identical pizza places: Tyrone's Pizza and Jade's Pizza. They only serve slices of cheese pizza. Both have very similar cost structures. There is a fixed cost of operating every month of $400 and there is a per unit variable cost of $0.50 per slice. Business relies on the steady demand from the local students of Gowling Breen State University (GBSU), who consume 900 slices per month (30 per day). Until now, students are evenly split, purchasing 15 slices a day from each pizza place (450 per month for each pizza place). Each place charges customers a price of $2.50 per slice.
e. Does each player have a dominant strategy? Explain, demonstrating that you know the definition of dominant strategy. Is there a Nash equilibrium? Explain, demonstrating that you know the definition of a Nash equilibrium.
f) Is this game a prisoner's dilemma? Explain, demonstrating your knowledge of prisoner's dilemma.
g) How might things change if this game were repeated every month and Tyrone and Jade had the opportunity to talk to one another?
h) Would the results of parts e-g change at all if each player also had a monthly implicit opportunity cost of $150? Why or why not?
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