Megan and Martha own competing hair salons that are in the same neighborhood. They are both considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly incomes in thousands of dollars if they offer and do not offer discounts to their customers. MarthaMegan DiscountNo DiscountDiscount$50, $75$75, $60No Discount$35, $90$70, $85If both Megan and Martha did not discount, what would each earn in yearly income? Megan would earn $50,000; Martha would earn $75,000. Megan would earn $75,000; Martha would earn $60,000. Megan would earn $35,000; Martha would earn $90,000. Megan would earn $70,000; Martha would earn $85,000. Megan would earn $35,000; Martha would earn $85,000.

Nash equilibrium is where both player chooses their best response and the best response of both…

Answered: Megan and Martha own competing hair…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 5MC

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Megan and Martha own competing hair salons that are in the same neighborhood. They are both considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly incomes in thousands of dollars if they offer and do not offer discounts to their customers.

	Martha
Megan		Discount	No Discount
Discount	$50, $75	$75, $60
No Discount	$35, $90	$70, $85

If both Megan and Martha did not discount, what would each earn in yearly income?

Megan would earn $50,000; Martha would earn $75,000.

Megan would earn $75,000; Martha would earn $60,000.

Megan would earn $35,000; Martha would earn $90,000.

Megan would earn $70,000; Martha would earn $85,000.

Megan would earn $35,000; Martha would earn $85,000.

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