Table 14-4

Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game.
-Refer to Table 14-4.If Alpha assumes that Beta would offer a student discount, what should it do?

Question

Table 14-4
  
Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game.
-Refer to Table 14-4.If Alpha assumes that Beta would offer a student discount, what should it do?

Quizplus · Accepted Answer

If Alpha assumes that Beta would offer a student discount, it should also offer a student discount. This is because if Alpha does not offer a discount, it will lose customers to Beta, which could result in a significant loss of profit. By offering a discount, Alpha can compete for customers and potentially retain its share of the market. Therefore, the best choice for Alpha in this scenario is to also offer a student discount.

Table 14-4 Alpha and Beta Are the Only Firms Selling Gyros in Only