Table 14-5

Martin and Lewis each run one of the two bingo parlors in Schenectady. Both consider offering free rides to and from the parlors. Table 14-5 shows the payoff matrix containing the expected weekly profits for each bingo parlor.
-Refer to Table 14-5.What is the Nash equilibrium in this game?

Question

Table 14-5
  
Martin and Lewis each run one of the two bingo parlors in Schenectady. Both consider offering free rides to and from the parlors. Table 14-5 shows the payoff matrix containing the expected weekly profits for each bingo parlor.
-Refer to Table 14-5.What is the Nash equilibrium in this game?

Quizplus · Accepted Answer

The Nash equilibrium in this game is for both Martin and Lewis to offer free rides. This is because if Martin offers free rides and Lewis does not, Martin's expected weekly profit is $2,000 and Lewis's expected weekly profit is $1,000. However, Lewis can increase his expected weekly profit to $1,500 by also offering free rides. Similarly, if Lewis offers free rides and Martin does not, Lewis's expected weekly profit is $2,500 and Martin's expected weekly profit is $1,500. Martin can increase his expected weekly profit to $2,000 by also offering free rides. Therefore, the best choice for both players is to offer free rides, resulting in a Nash equilibrium.

Table 14-5 Martin and Lewis Each Run One of the Two Bingo