For the situation, identify the two players and their possible choices, and cons

Question

For the situation, identify the two players and their possible choices, and construct a payoff matrix for their conflict. Andersonville has two gas stations, Ralph's Qwik-Serv and Charlie's Gas-n-Go. Both Ralph and Charlie are considering raising prices by 1Ac, staying with their current prices, or lowering prices by 1Ac. If they both make the same choice, there will be no change in their market shares, but if they make different choices, the one with the lower price will gain 7% of the market for each penny difference in their prices. What does R represent? R represents raising the price by It. R represents lowering the price by It. R represents keeping the price the same. What does S represent? S represents lowering the price by It. S represents keeping the price the same. S represents raising the price by 1e. What does L represent? L represents raising the price by 1e. L represents lowering the price by 1e. L represents keeping the price the same.

Explanation / Answer

R S L

R 1,1 0.93,1 0.86,1

S 1,0.93 1,1 0.93, 1

L 1,0.86 1,0.93 1,1

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