Theater 1 and Theater 2 are the only movie theaters in town. They each choose one of three prices for movie tickets: Low, Medium, or High. If they select the same price, they will split the market. If one of the movie theaters chooses a lower price, it will get more clients. Their interaction is described as a game. Theater 2 High ($6,000, $0) |($2,000, $5,000) ($4,000, $4,000)| ($7,000, $2,000) ($5,000, $5,000) Low Medium Low |($3,000, $3,000) ($5,000, $2,000) Medium High ($0, $6,000) ($2,000, $7,000) a) Do these players have a maxi-min or dominant strategies? If so, what are they? b) What are the Nash equilibrium or equilibria for this game? Explain c) What kind of games is this? What is the profit-maximizing (the highest total profit) outcome and how can the theaters reach it? Theater 1
Theater 1 and Theater 2 are the only movie theaters in town. They each choose one of three prices for movie tickets: Low, Medium, or High. If they select the same price, they will split the market. If one of the movie theaters chooses a lower price, it will get more clients. Their interaction is described as a game. Theater 2 High ($6,000, $0) |($2,000, $5,000) ($4,000, $4,000)| ($7,000, $2,000) ($5,000, $5,000) Low Medium Low |($3,000, $3,000) ($5,000, $2,000) Medium High ($0, $6,000) ($2,000, $7,000) a) Do these players have a maxi-min or dominant strategies? If so, what are they? b) What are the Nash equilibrium or equilibria for this game? Explain c) What kind of games is this? What is the profit-maximizing (the highest total profit) outcome and how can the theaters reach it? Theater 1
Chapter8: Game Theory
Section: Chapter Questions
Problem 8.7P
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![Theater 1 and Theater 2 are the only movie theaters in town. They each choose one of
three prices for movie tickets: Low, Medium, or High. If they select the same price, they
will split the market. If one of the movie theaters chooses a lower price, it will get more
clients. Their interaction is described as a game.
Theater 2
High
($6,000, $0)
|($2,000, $5,000) | ($4,000, $4,000) | ($7,000, $2,000)
($2,000, $7,000) ($5,000, $5,000)
Medium
($3,000, $3,000) ($5,000, $2,000)
Low
Low
Medium
High
($0, $6,000)
a) Do these players have a maxi-min or dominant strategies? If so, what are they?
b) What are the Nash equilibrium or equilibria for this game? Explain
c) What kind of games is this? What is the profit-maximizing (the highest total profit)
outcome and how can the theaters reach it?
Theater 1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd0328f32-a0e3-442e-b953-def482191a5f%2F071c2ddf-3153-4aed-a0d2-6af91b3443a1%2Fglnccmmv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Theater 1 and Theater 2 are the only movie theaters in town. They each choose one of
three prices for movie tickets: Low, Medium, or High. If they select the same price, they
will split the market. If one of the movie theaters chooses a lower price, it will get more
clients. Their interaction is described as a game.
Theater 2
High
($6,000, $0)
|($2,000, $5,000) | ($4,000, $4,000) | ($7,000, $2,000)
($2,000, $7,000) ($5,000, $5,000)
Medium
($3,000, $3,000) ($5,000, $2,000)
Low
Low
Medium
High
($0, $6,000)
a) Do these players have a maxi-min or dominant strategies? If so, what are they?
b) What are the Nash equilibrium or equilibria for this game? Explain
c) What kind of games is this? What is the profit-maximizing (the highest total profit)
outcome and how can the theaters reach it?
Theater 1
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