Store A and Store B compete for the business of the same customer base. Store A has 55% of the business and Store B has 45%. Both companies intend to expand to increase their market share. If both expand, or neither expand, they expect their market share to remain the same. If Store A expands and Store B does not, then Store A’s share increases to 65%. If Store B expands and Store A does not, then Store A's share drops to 50%. Determine which strategy, to expand or not, each company should take.

Store A and Store B compete for the business of the same customer base. Store A has 55% of the business and Store B has 45%. Both companies intend to expand to increase their market share. If both expand, or neither expand, they expect their market share to remain the same. If Store A expands and Store B does not, then Store A’s share increases to 65%. If Store B expands and Store A does not, then Store A's share drops to 50%. Determine which strategy, to expand or not, each company should take.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 7P

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