Question
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Growth-related profits of the two discount superstores under two scenarios are reflected in the table below.
SuperDuper Saver
| Increase the size of store and parking lot | Do not increase the size of store and parking lot |
Ultimate Saver | Increase the size of store and parking lot |
SuperDuper Saver = $50 Ultimate Saver = $65 |
Do not increase the size of store and parking lot |
SuperDuper Saver = $250 Ultimate Saver = $35 |
a. How many players do consist this normal form game? And name the player(s).
b. Is there dominant strategy for SuperDuper Saver? If existing, state its dominant strategy and explain why. If not existing, explain why its dominant strategy is not existing.
c. Is there dominant strategy for Ultimate Saver? If existing, state its dominant strategy and explain why. If not existing, explain why its dominant strategy is not existing.
d. What is the Nash equilibrium for these discount superstores?
e.When this game reaches a Nash equilibrium, what will the dollar value of growth-related profits be?
f. The owners of SuperDuper Saver and Ultimate Saver meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth-related profit. What should they both agree to do? And what is the reason behind this agreement?
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