Question

Pizza King (PK) and Noble Greek (NG) are competitive pizza chains. PK believes there is a 25% chance that NG will charge $6 per pizza, a 50% chance NG will charge $8 per pizza, and a 25% chance that NG will charge $10 per pizza. If PK charges price p1 and NG charges price p2, PK will sell 100 + 25(p2 - p1) pizzas. It costs PK $4 to make a pizza. PK is considering charging $5, $6, $7, $8, or $9 per pizza. To maximize its expected profit, what price should PK charge for a pizza?



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  • CreatedApril 01, 2015
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