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Question: consider the following scenario a small town is served by...

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Consider the following scenario:

A small town is served by two grocery stores, White and Gray. Each store must decide whether it will remain open on Sunday or whether it will close on that day. Monthly payoffs for each strategy pair are shown in the following table:

Grays Choices Open Sundays Closed Sundays 7000 8000 Open Whites Sundays 1000 Choices 7000 10000 12,000 Closed Sundays 3000 6000

Showing all of your work, answer the following questions:

A) Which firm is the more profitable in this market?

B) Does the firm you identified as more profitable have a dominant strategy?

C) Based on your calculations, what should the more profitable firm do: open on Sundays or close on Sundays? Explain your answer.

D) Is this an example of a Prisoner’s Dilemma? Explain your answer.

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