# Question

A small town has two service stations, which share the town’s market for gasoline. The owner of Station A is debating whether to give away free glasses to her customers as part of a promotional scheme, and the owner of Station B is debating whether to give away free steak knives. They know (from similar situations elsewhere) that if Station A gives away free glasses and Station B does not give away free steak knives, Station A’s share of the market will increase by 6 percent; if Station B gives away free steak knives and Station A does not give away free glasses, Station B’s share of the market will increase by 8 percent; and if both stations give away the respective items, Station B’s share of the market will increase by 3 percent.

(a) Present this information in the form of a payoff table in which the entries are Station A’s losses in its share of the market.

(b) Find optimum strategies for the owners of the two stations.

(a) Present this information in the form of a payoff table in which the entries are Station A’s losses in its share of the market.

(b) Find optimum strategies for the owners of the two stations.

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