Bill and Mary sell ice-cream on the boardwalk in Atlantic City. They are competitors. There are two spots available to set up shop on the boardwalk: spot A and spot B. Spot A gets more foot traffic than B. The amount of foot traffic at a spot determines the payoffs of the ice-cream sellers. If one seller chooses A and the other chooses B, then the seller on A gets a payoff of $150o, while the seller on B gets a payoff of $800. If both sellers choose A, then they each get $700. If they both choose B, then they each get $600. Suppose Mary gets to choose her location first and that Bill observes this choice before making his own choice. Which of the following is not consistent with a Nash Equilibrium of this game? 1) Mary chooses A, and Bill chooses B. 2) Mary chooses B, and Bill chooses A. 3) None of the above.
Bill and Mary sell ice-cream on the boardwalk in Atlantic City. They are competitors. There are two spots available to set up shop on the boardwalk: spot A and spot B. Spot A gets more foot traffic than B. The amount of foot traffic at a spot determines the payoffs of the ice-cream sellers. If one seller chooses A and the other chooses B, then the seller on A gets a payoff of $150o, while the seller on B gets a payoff of $800. If both sellers choose A, then they each get $700. If they both choose B, then they each get $600. Suppose Mary gets to choose her location first and that Bill observes this choice before making his own choice. Which of the following is not consistent with a Nash Equilibrium of this game? 1) Mary chooses A, and Bill chooses B. 2) Mary chooses B, and Bill chooses A. 3) None of the above.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.8P
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