Joe is the owner of the PetroCanada Mini Mart,Sam is the owner of the BP Mini Mart,and together they are the only gas stations in town.At the current price of $1 per litre,each receives total revenue of $1000.Joe is considering cutting his price to 90 cents per litre,which would increase his total revenue to $1350.If Sam's price remains at $1 per litre after Joe cuts his price,Sam will collect $500 in revenue.If Sam cuts his price to 90 cents per litre,his total revenue would also rise to $1350 if Joe continues to charge $1 per litre.Joe will collect $500 in revenue if he keeps his price at $1 per litre while Sam lowers his to 90 cents per litre.Joe and Sam will receive $900 each in total revenue if they both lower their price to 90 cents per litre.You may find it easier to answer the following questions if you fill in the payoff matrix below.
-Refer to the information given above.The payoffs to Joe in this game are
A) $900 and $500.
B) $1000 and $500.
C) $1350 and $900.
D) $1350,$1000,$900,and $500.
E) $1350 and $1000.

Question

Joe is the owner of the PetroCanada Mini Mart,Sam is the owner of the BP Mini Mart,and together they are the only gas stations in town.At the current price of $1 per litre,each receives total revenue of $1000.Joe is considering cutting his price to 90 cents per litre,which would increase his total revenue to $1350.If Sam's price remains at $1 per litre after Joe cuts his price,Sam will collect $500 in revenue.If Sam cuts his price to 90 cents per litre,his total revenue would also rise to $1350 if Joe continues to charge $1 per litre.Joe will collect $500 in revenue if he keeps his price at $1 per litre while Sam lowers his to 90 cents per litre.Joe and Sam will receive $900 each in total revenue if they both lower their price to 90 cents per litre.You may find it easier to answer the following questions if you fill in the payoff matrix below. 
-Refer to the information given above.The payoffs to Joe in this game are
A) $900 and $500. 
B) $1000 and $500. 
C) $1350 and $900. 
D) $1350,$1000,$900,and $500. 
E) $1350 and $1000.

Quizplus · Accepted Answer

The payoffs to Joe are $1350, $1000, $900, and $500. Joe's best choice(s) depend on Sam's choice(s). If Sam keeps his price at $1, Joe's best choice is to lower his price to 90 cents and receive $1350 in revenue. If Sam also lowers his price to 90 cents, Joe's best choice is to also lower his price to 90 cents and receive $900 in revenue. Therefore, Joe's optimal choices are to lower his price to 90 cents if Sam does not lower his price and to also lower his price to 90 cents if Sam does lower his price.

Joe Is the Owner of the PetroCanada Mini Mart,Sam Is