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1. For the situation, identify the two players and their possible choices, and construct a payoff matrix for their conflict. In an attempt to gain more viewers, Channel 86 and Channel 7 are each trying to decide whether to schedule a quiz show or a reality series in their 8:00 prime time slot. Market research indicates that if Channel 86 chooses a quiz show, it will gain 4% of the market if Channel 7 runs a quiz show and lose 9% if Channel 7 runs a reality series, while if Channel 86 chooses a reality series, it will gain 10% if Channel 7 runs a quiz show and lose 10% if Channel 7 runs a reality series. [Hint: Use Q and R for quiz show and reality series.] Channel 7 Q R Channel 86 Q R % % % %

2.For the situation, identify the two players and their possible choices, and construct a payoff matrix for their conflict. Andersonville has two gas stations, Ralph's Qwik-Serv and Charlie's Gas-n-Go. Both Ralph and Charlie are considering raising prices by 1, staying with their current prices, or lowering prices by 1. If they both make the same choice, there will be no change in their market shares, but if they make different choices, the one with the lower price will gain 4% of the market for each penny difference in their prices. Charlie R S L Ralph R S L % % % % % % % % %

3.Determine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question.

In an ongoing price war between Burger Haven (locally owned) and MacArches (a chain), both restaurant managers plan to change the price of a hamburger by 10. If they both raise their prices, there will be no change in their market shares, but if they both lower their prices, the chain's national advertising will ensure that MacArches gains 3% of the market. Again because of advertising, if Burger Haven lowers their price and MacArches raises their price, Burger Haven will gain only 2% of the market, but if Burger Haven raises their price and MacArches lowers their price, MacArches will gain 6% of the market. Use this information to decide what the managers should do.

MacArches

L R

Burger Haven

L

R

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