Starbucks Expand Do not expand Dunkin' Donuts Dunkin' Donuts Expand Do not expand Expand Do not expand S: -$2m DD: -2m < Prev ***** S: $2m DD: -$1m S: -$1m DD: $2m S: DD: $0 The figure displays the choices that could be made by two coffee shops: Starbucks and Dunkin' Donuts. Both companies are trying to decide whether or not to expand into a new area. The area can handle only one coffee shop's expansion, and the expansion of one shop will cause the other to lose some business. If both coffee shops expand, the market will become saturated and neither will do well. The payoffs for these shops are the additional profits (or losses) they will earn. If Dunkin' Donuts is able to use a commitment device that commits itself to expansion, then Starbucks should: 19 of 50 Next > 0000