Starbucks is considering opening a coffee shop at a College Campus, a market that is served exclusively by Tim Hortons, and whose total value = 4. If Starbucks enters the market, Tim Hortons can either acquiesce or retaliate.

• If Starbucks declines to enter, Starbucks' payoff = 0 and Tim Hortons' payoff = 4.
• If Starbucks enters the market and Tim Hortons acquiesces, they share the market, and each receives a payoff of 2.
• If Starbucks enters the market and Tim Hortons retaliates with severe price reductions, they each receive a payoff of -4.

If you are the Business Development Manager of Starbucks, which theory could help you decide whether or not to open the coffee shop at this campus? What is your decision? What reaction is Tim Hortons most likely to take, acquiesce or retaliate? (You should answer the question directly. Include a brief explanation).

Hint: using Game Theory to answer.