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The table below shows the payoff matrix of two supermarkets, ABC and XYX each has two pricing strategies, to raise or lower the price of
The table below shows the payoff matrix of two supermarkets, ABC and XYX each has two pricing strategies, to raise or lower the price of groceries. The figures in the matrix show the profits earned by each firm.
XYZ | |||
Raise Price | Lower Price | ||
ABC | Raise Price | $40m for ABC $27m for XYZ | $20m for ABC $33m for XYZ |
Lower Price | $31m for ABC $28m for XYZ | $70m for ABC $56m for XYZ |
A) Solve this game using the Nash equilibrium method and explain whether this game is prisoner's dilemma game b) If the game becomes a sequential game and ABC gets to move first, construct the decision tree diagram and solve the sequential game using rollback method.
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