1. a) does not clean b) cleans 2. a) does not clean b) cleans 3. a) does not cle
ID: 1197362 • Letter: 1
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1. a) does not clean b) cleans
2. a) does not clean b) cleans
3. a) does not clean b) cleans
4.a) does not clean b) cleans
11. Collusive versus noncollusive outcomes Aa Aa Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly Both restaurants disregard health and safety regulations, but they continue to have customers because they are th only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $9,000; alternatively, if they both hire workers to clean, each will earn only $4,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $13,000, and the other restaurant will make only $2,000 Based on the information given, use the dropdown menus to fill in the payoff matrix that follows. All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms. GoodGrub Diner Clean Up Don't Clean Up Clean Up All-You-Can-Eat Cafe Don't Clean Up If All-You-Can-Eat Café and GoodGrub Diner decide to collude, the outcome of this game is as follows: All-You-Can-Eat Cafe , and GoodGrub Diner If both restaurants decide to cheat and behave uncooperatively, the equilibrium of this game is as follows: All-You-Can-Eat Café , and GoodGrub DinerExplanation / Answer
When both of them collude, they know that they can cut cost by not cleaning the restaurant and earn 9000 each. So they don't clean.
If they cheat on each other. they think that the other will clean the restaurant and earn more money. So they both end up cleaning the restaurant.
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