Table 17-13 Two home-improvement stores (Lopes and HomeMax) in a growing urban a
ID: 1204377 • Letter: T
Question
Table 17-13
Two home-improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits of the two home-improvement stores are shown in the table below.
a.
$1.0 million for Lopes and by $1.5 million for HomeMax.
b.
$0.4 million for Lopes and by $3.4 million for HomeMax.
c.
$3.2 million for Lopes and by $0.6 million for HomeMax.
d.
$2.0 million for Lopes and by $2.5 million for HomeMax.
a.
$1.0 million for Lopes and by $1.5 million for HomeMax.
b.
$0.4 million for Lopes and by $3.4 million for HomeMax.
c.
$3.2 million for Lopes and by $0.6 million for HomeMax.
d.
$2.0 million for Lopes and by $2.5 million for HomeMax.
Lopes Increase the size of store* and parking lot- Do not increase the size of- store and parking lot- Lopes = $0.4 million. Increase the size of store and- Lopes $ 1 .0 million . HomeMax = $1.5 million« HomeMax = $3.4 million« arking lote Do not increase the size of storei and parking lot- HomeMax» Lopes = $3.2 million- HomeMax = $0.6 million« Lopes $2.0 million. HomeMax = $2.5 million«Explanation / Answer
since both agree to cooperate on a strategy that maximizes their joint profits, therefore, annual profit will grow by
d. $2.0 million for Lopes and by $2.5 million for HomeMax.
this is the case because no other cell shows increase in joint profit higher than this cell.
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