Megan and Amanda are both 7 years old and operate lemonade stands. Megan lives on the east side of Welch Avenue, while Amanda resides on the west side of Welch Avenue. Each morning, the girls must decide whether to place their stand on Welch Avenue or Lincoln Avenue. When they set their stand- up, they don t know what the other will do and can t relocate. If both girls put their stand on Welch, both girls each receive $175 in profits. If both girls put their stand on Lincoln, they each receive $75 in profits. If one girl sets her stand on Welch while the other operates on Lincoln, the stand on Welch earns $300 in profits while the stand on Lincoln earns $225.

a) Construct the normal-form pay-off matrix.

b) What is a dominant strategy? Does either girl have a dominant strategy? Explain.

c) What is meant by Nash Equilibrium? Does the game described above have Nash Equilibrium?