Question Two

Kamau and Njoroge are brothers specializing in the hawking business along River Road, Nairobi. Kamau specializes in hawking shirts while Njoroge is in Electronics. However, of late, sales have been on a declining trend partly attributable to harsh economic conditions and the citys metropolitan regulations. Each of the brothers is considering expanding the business to include an item on which now Wanjiru has a monopoly. Each brother knows that the other is considering expanding, and this influences their decision-making.

(i) If Kamau expands alone, Kamau will earn a zero net profit increase per day.

(ii) If Njoroge expands alone, Kamau would make a loss of Kes 500 of profit per day.

(iii) If neither expands, Kamau thinks to earn a net profit of Kes 500 per day attributable to a good business location.

(iv) If both expand, a combination of location and expanded inventory will boost Kamau's daily profit by Kes 1000.

Required:

a) Prepare a game matrix

b) Solve the above matrix to find each average gain or loss