This figure displays the choices being made by two coffee shops: Starbucks and Dunkin Donuts.Both companies are trying to decide whether or not to expand in an area.The area can handle only one of them expanding,and whoever expands will cause the other to lose some business.If they both expand,the market will be saturated,and neither company will do well.The payoffs are the additional profits (or losses)they will earn.
If Starbucks and Dunkin Donuts are faced with the game in the figure shown,we can see that:
A) Starbucks has a dominant strategy, but Dunkin Donuts does not.
B) Dunkin Donuts has a dominant strategy, but Starbucks does not.
C) neither company has a dominant strategy.
D) both companies have a dominant strategy.

Question

This figure displays the choices being made by two coffee shops: Starbucks and Dunkin Donuts.Both companies are trying to decide whether or not to expand in an area.The area can handle only one of them expanding,and whoever expands will cause the other to lose some business.If they both expand,the market will be saturated,and neither company will do well.The payoffs are the additional profits (or losses)they will earn.
If Starbucks and Dunkin Donuts are faced with the game in the figure shown,we can see that:
A) Starbucks has a dominant strategy, but Dunkin Donuts does not. 
B) Dunkin Donuts has a dominant strategy, but Starbucks does not. 
C) neither company has a dominant strategy. 
D) both companies have a dominant strategy.

Quizplus · Accepted Answer

Neither company has a dominant strategy in this game. This means that each player's optimal choice depends on their expectation of their opponent's choice. The best outcome for both companies would be for neither to expand, leading to no additional profits or losses. However, if one company chooses to expand and the other does not, the expanding company will earn additional profits while the other loses some business. If both companies choose to expand, the market will be saturated, and both will see a decrease in profits. Ultimately, the outcome depends on the expectations and actions of both players.

This Figure Displays the Choices Being Made by Two Coffee