Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. $$\begin{array} { | l | c | c | }
\hline & \begin{array} { c }
\text { Quick Burger } \
\text { Operates a } \
\text { Drive-Through } \
\text { Window }
\end{array} & \begin{array} { c }
\text { Quick Burger } \
\text { Does Not Operate } \
\text { Drive-Through } \
\text { Window }
\end{array} \
\hline \text { Quick Burger } & \$ 24,000 & \$ 15,000 \
\hline \text { The Sunshine Café } & \$ 11,000 & \$ 23,000 \
\hline
\end{array}$$ If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-though window?
A)No, because it is not socially efficient to operate a drive-through.
B)Yes, because Quick Burger's payoff is higher when it operates a drive-through.
C)No, because it would lower the payoff for The Sunshine Café.
D)It cannot be determined.

Question

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { Quick Burger } \
\text { Operates a } \
\text { Drive-Through } \
\text { Window }
\end{array} & \begin{array} { c } 
\text { Quick Burger } \
\text { Does Not Operate } \
\text { Drive-Through } \
\text { Window }
\end{array} \
\hline \text { Quick Burger } & \$ 24,000 & \$ 15,000 \
\hline \text { The Sunshine Café } & \$ 11,000 & \$ 23,000 \
\hline
\end{array}$$ If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-though window?
A)No, because it is not socially efficient to operate a drive-through.
B)Yes, because Quick Burger's payoff is higher when it operates a drive-through.
C)No, because it would lower the payoff for The Sunshine Café.
D)It cannot be determined.

Quizplus · Accepted Answer

Quick Burger will operate a drive-through window because its payoff is higher when it does so. The fact that The Sunshine Café will lose out is irrelevant because the two restaurants cannot negotiate with each other. The concept of social efficiency is also not relevant to the decision made by Quick Burger.

Consider Two Restaurants Located Next Door to Each Other: Quick