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 100.$100.$

If they both run a Galway service, both make a profit of 60.$60.$ A monopolist in Dublin makes a profit of 320,$320,$ while a Galway

monopolist earns a profit of 200.$200.$

Suppose that Fastcare makes its location decision first. SuperHealth observes Fastcare??$\mathrm{??}$s decision and then makes its own

choice.

($($a)$)$ Draw this game in extensive form

($($b)$)$ What are the hospitals??$\mathrm{??}$ 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?

Answer rating: 100% (QA)

a Drawing the game in extensive form Fastcare Dublin Galway SuperHealth SuperHealth Dublin Galway Du... View the full answer