Problem 4 In your neighborhood, there is one grocery store and one tailor. At the moment, the profits of the grocery store owner are around $10K per month while the tailor's profits are only $4K per month. The tailor asks your advice about whether to change his shop into a grocery store. He figures that if the grocer does not respond aggressively to the new competition, each of them will earn about $6K per month. On the other hand, if the grocer does respond aggressively and starts a price war, then the earnings of each store will be reduced to about $2K per month.

What is your advice to the tailor?