John and Anne are the only two suppliers of snacks at school while everyone waits for a
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Question:
John and Anne are the only two suppliers of snacks at school while everyone waits for a ride after sports and clubs. Each student can choose to set a high price or a low price for their goods. The payoff matrix below shows the daily profits for each combination of prices that John and Anne could set. The first entry shows Anne's profits, and the second entry shows John's profits. Assume that both students know the information shown in the matrix. Study the matrix, and then answer the questions that follow.
JohnHigh Price
Low Price
AnneHigh Price$21, $22$8, $26Low Price$24, $16$15, $14
- Do John and Anne each have a dominant strategy to set a high price, a dominant strategy to set a low price, or no dominant strategy?
- Anne
- John
- If John and Anne do not cooperate on price setting, what will be the profit for each of them?
- Anne
- John
- A club sponsor with hungry students agrees to pay $4 to John and Anne each if they charge the lower price for their snacks. Redraw the payoff matrix with this subsidy.
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