GAME THEORY AND OLIGOPOLY. Profit payoff Matrix for Subways andQuiznos (Sandwich Style Resturants. Below is the profitpayoff matrix for these two restaurants depending on whether theyset their Chicken sandwich price HIGH or LOW
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TABLE 1 | Quiznos LOW price | Quiznos HIGH price |
Subway LOW price | $7 million for Subway $7 million for Quiznos | $12 million for Subway $5 million for Quiznos |
Subway HIGH price | $5 million for Subway $12 million for Quiznos | $9 million for Subway $9 million for Quiznos |
a) Using Table, what if any is thecollusive outcome? Explain whether it willoccur.
b) Using Table, what if any is theNash equilibrium? Explain whether it willoccur.
TABLE 2 | Quiznos LOW price | Quiznos HIGH price |
Subway LOW price | $7 million for Subway $8 million for Quiznos | $12 million for Subway $6 million for Quiznos |
Subway HIGH price | $10 million for Subway $12 million for Quiznos | $9 million for Subway $9 million for Quiznos |
c) What is meant by a dominantstrategy? Using Table 2, is there a dominantstrategy? Explain, and determine which outcome willoccur?
