Table 16-8 Two Discount Superstores (Ultimate Saver and SuperDuper Saver) in a in a Growing

Table 16-8
Two discount superstores (Ultimate Saver and SuperDuper Saver) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their stores and parking lots to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Growth-related profits of the two discount superstores under two scenarios are shown in the table:
a. What are growth related profits for Ultimate Saver if both stores follow a dominant strategy?
b. What are growth related profits for SuperDuper Saver if both stores follow a dominant strategy?
c. If the owners of Ultimate Saver and SuperDuper Saver meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimise their growth-related profits, what strategy should they agree to? How would they enforce this agreement? If the collusive agreement was enforceable, how would the wellbeing of society be impacted by the agreement?

Correct Answer:

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a. $85
b. $70
c. It is likely that they ...

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