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 1¢, staying with their current prices, or lowering prices by 1¢. 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 5% of the market for each penny difference in their prices.

What does R represent?

R represents lowering the price by 1¢. R represents raising the price by 1¢.     R represents keeping the price the same.

What does S represent?

S represents lowering the price by 1¢. S represents keeping the price the same.     S represents raising the price by 1¢.

What does L represent?

L represents keeping the price the same. L represents raising the price by 1¢.     L represents lowering the price by 1¢.

Explanation / Answer

A) HERE THE R MEANS THAT THE PRICE IS INCREASED BY $1 AS PER THE QUESTION GIVEN SO OPTION B IS CORRECT.

B) S MEANS THAT IT IS REDUCED BY $1 AS PER THE QUESTION AND THE OPTION A IS CORRECT.

C) L MEANS THAT THE PRICE HAS BEEN KEPT SAME SO THE OPTION A IS CORRECT ACCORDING TO THE QUESTION.

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