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in the town of South Haven,




in the town of South Haven, there are two petrol stations across the street from each other, the East station and the West station. A local bylaw requires that they are permitted to change the price of petrol only once a week at precisely 8:00 a.m. on Monday and in 5 cent increments. For some time, the price of petrol has been stable at $1.45 per litre, but midweek, the price each station pays for petrol changed to $1.50. In the payoff matrix below the respective payoffs for each station are provided for charging prices of $1.45, $1.50 and $1.55 per litre. The payoffs are written as [East, West].;West;1.45 1.50 1.55;1.45 (-25,-25) (-50,0) (-50, 0);East 1.50 (0, -50) (0, 0) (0, 0);1.55 (0, -50) (0, 0) (25, 25);From the starting point of a price of $1.50 per litre, the stations can either cut price to $1.45 per litre, hold prices at $1.50 per litre, or raise prices to $1.55 per litre.;Given the payoff matrix above, which of the following strategies is a pure strategy Nash equilibrium?;Choose one answer.;a. (hold, hold) and (raise, raise);b. (cut, cut), (hold, hold) and (raise, raise);c. There is no pure strategy Nash equilibrium;d. (cut, cut) and (hold, hold);e (raise, raise)


Paper#26982 | Written in 18-Jul-2015

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