Economics question regarding profits and calculations


  1. Consider the following scenario:
  2. 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:

    Gray’s choices

  3. Showing all of your work, answer the following questions:
    1. Which firm is the more profitable in this market?
    2. Does the firm you identified as more profitable have a dominant strategy?
    3. Based on your calculations, what should the more profitable
      firm do: open on Sundays or close on Sundays?  Explain your answer.
    4. Is this an example of a Prisoner’s Dilemma?  Explain your answer.

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