Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. The clear outcome of this game is that:
A)Joe will cut his price and Sam won't.
B)both Joe and Sam will cut their price.
C)Sam will cut his price and Joe won't.
D)neither Joe nor Sam will cut his price.

Question

Quizplus · Accepted Answer

For each player, the dominant strategy is to cut the price.

Joe Is the Owner of the 7-11 Mini Mart, Sam