Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies.
-Refer to the payoff matrix above. If Camp R Us announces that it will offer special financing, Happy Campers believe Camp R Us as their incentives ______ align.
A)should; do not
B)should not; do
C)should; do
D)should not; do not

Question

Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies.
-Refer to the payoff matrix above. If Camp R Us announces that it will offer special financing, Happy Campers believe Camp R Us as their incentives ______ align.
A)should; do not 
B)should not; do 
C)should; do 
D)should not; do not

Quizplus · Accepted Answer

If Camp R Us announces that it will offer special financing, Happy Campers believe that Camp R Us will follow through and offer the special financing since it is in their best interest to do so based on the payoff matrix. Therefore, Camp R Us should actually offer the special financing as it will result in the highest net economic profit for both firms. This is the only Nash equilibrium in the game.

Camp with Us and Happy Campers Compete in the Market