Two private hospitals ( ( Fastcare and SuperHealth ) ) are deciding whether to locate in Dublin
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Question:
Two private hospitals Fastcare and SuperHealth are deciding whether to locate in Dublin or Galway. It is assumed that
each hospital will only operate in one location. Demand for health services is higher in Dublin than in Galway. Assuming
that annual profits are expressed in units of thousands, if both hospitals operate in Dublin, they both make a profit of
If they both run a Galway service, both make a profit of A monopolist in Dublin makes a profit of while a Galway
monopolist earns a profit of
Suppose that Fastcare makes its location decision first. SuperHealth observes Fastcares decision and then makes its own
choice.
a Draw this game in extensive form
b What are the hospitals strategy sets?
c How many Nash equilibria in strategies are there, if any?
d How many of the Nash equilibria in strategies are subgame perfect, if any?
e Could SuperHealth make itself better off by committing to choosing a specific location? If yes, how? If not, why?
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