Question: 8 0 A new storefront has room for two new businesses. Elizabeth has rented out half of the space and is deciding whether to open
A new storefront has room for two new businesses. Elizabeth has rented out half of the space and is deciding whether to open a BBQ restaurant or a sandwich shop. Harper has rented out the other half of the space and is deciding whether to open a bakery or a plant shop. Each has done some market research and has determined how their profits will vary based on what stores are chosen. See the table below for more information.
tableElizabeth's Ranking,Harper's RankingHighest profitBBQ BakerySandwich PlantSandwich BakerySandwich BakerySandwich PlantBBQ PlantLowest profitBBQ PlantBBQ Bakery
So for example, Elizabeth's greatest profits come if she opens a BBQ restaurant and Harper opens a bakery, while Harper's greatest profits come if she opens a plant shop and Elizabeth opens a sandwich shop. Elizabeth and Harper cannot communicate, so this functions as a simultaneous game which is the only type of game we have discussed in class Which of the following is a Nash Equilibrium?
Hint: you should turn the above rankings into a payoff matrix and solve the payoff matrix like we did in class.
Elizabeth opens a sandwich shop, Harper opens a bakery
Elizabeth opens a sandwich shop, Harper opens a plant shop
This game does not have a Nash Equilibrium
Elizabeth opens a bakery, Harper opens a plant shop
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