Q5. FoodGiant and MiniCrunch are two big burrito restaurant chains. Each restaurant is weighing out their pros and cons and considering the other firm's reaction to take an important decision on pricing next week. Each firm is faced with two option: to charge a high price or to charge a lower price. If both firms charge a higher price, they make profits of $2500 each, while if both firms choose to charge a lower price, they make $4000 in profits. If one firm chooses charge a lower price while the other charges a higher price, the former makes a profit of $4500 while the latter makes $1000. Draw the payoff matrix for FoodGiant and MiniCrunch. Find the dominant strategy for each firm and subsequently the Nash Equilibrium. Have both firms maximized profits? Why or why not? Explain.

Q5. FoodGiant and MiniCrunch are two big burrito restaurant chains. Each restaurant is weighing out their pros and cons and considering the other firm's reaction to take an important decision on pricing next week. Each firm is faced with two option: to charge a high price or to charge a lower price. If both firms charge a higher price, they make profits of $2500 each, while if both firms choose to charge a lower price, they make $4000 in profits. If one firm chooses charge a lower price while the other charges a higher price, the former makes a profit of $4500 while the latter makes $1000. Draw the payoff matrix for FoodGiant and MiniCrunch. Find the dominant strategy for each firm and subsequently the Nash Equilibrium. Have both firms maximized profits? Why or why not? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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