ru and Merritts Grill compete in the sandwich market. They are trying to decide how to price their sandwiches. The potential market is 100 customers a day. If both firms price high at $12 a sandwich, some customers won’t want to buy but 80 still will consume, and the shops will equally split the market. If one firm prices high at $12 and one prices lower at $7, the shop that prices lower will receive all the business of 100 consumers and the high price shop will receive no business. If both shops price low at $7, then the shops will split the 100 consumers. Let’s simplify to both firms’ cost=0 a) The payoffs to each action are in the form of profit to each firm. Construct a matrix with the correct payoffs. Make sure to identify the Nash equilibrium/equilibri
1. Tru and Merritts Grill compete in the sandwich market. They are trying to decide how to price their sandwiches. The potential market is 100 customers a day. If both firms price high at $12 a sandwich, some customers won’t want to buy but 80 still will consume, and the shops will equally split the market. If one firm prices high at $12 and one prices lower at $7, the shop that prices lower will receive all the business of 100 consumers and the high price shop will receive no business. If both shops price low at $7, then the shops will split the 100 consumers. Let’s simplify to both firms’ cost=0
a) The payoffs to each action are in the form of profit to each firm. Construct a matrix with the correct payoffs. Make sure to identify the Nash equilibrium/equilibria.
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