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competing firms in the retail sector,




There are two competing firms in the retail sector, Blue Mart and Red Shop. These firms are in the process of finding new location of new stores in the suburbs of a major city. The payoff matrix is given below with the first entry of each cell represents Red Shop?s daily profit while the second entry in each cell represents the daily profit for Blue Mart. Both firms know of all the information in the payoff matrix.;Blue Mart;North South;Red Shop North $900, $1,800 $3,000, $3,500;South $5,000, $4,000 $1,500, $1,000;a. If the Red Shop chooses the location South of the city, which one is better for Blue Mart choose? Explain;b.Is choosing the location south of the city a dominant strategy for Red Shop? Explain.;c. If both firms cooperate in choosing the locations, where will each firm locate?;d. Assume that the South suburb has enacted an incentive package to attract new businesses. Any firm that locates to the south of the city will receive a subsidy of $2,000 per day. Redraw the payoff matrix to include the payoff matrix.


Paper#21334 | Written in 18-Jul-2015

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