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Two home improvement retailers, the Home Center (HC) and Lowe's Depot (LD), are deciding whether to invest more in do-it-yourself (DIY), where customers do their
Two home improvement retailers, the Home Center (HC) and Lowe's Depot (LD), are deciding whether to invest more in "do-it-yourself" (DIY), where customers do their own home remodel or repairs, or "we-do-it" (WDI) services, where the home improvement store does the work for the customer. The payoffs for the firms are given below, where HC's profit is listed before the comma, and LD's profit is listed after the comma.
Answer the following three questions, assuming this is a one-shot simultaneous game:
- (3 points) Which firms (if any) have a dominant strategy?
- (5 points) What is the Nash Equilibrium (or equilibria) of this game, if any?
- (2 points) Is this game an example of a prisoner's dilemma?
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