Wal-Mart Stores,? Inc., is an enormously successful chain of discount retail sto
ID: 1225925 • Letter: W
Question
Wal-Mart Stores,? Inc., is an enormously successful chain of discount retail stores started by Sam Walton in 1969. ? Wal-Mart's expansion strategy has been to charge less than ordinary department stores and small retail stores by relying on size and? high-inventory turnover. Sam Walton began opening his stores in small Southwestern towns. By the?mid-1970s, other discount chains realized that? Wal-Mart has a profitable strategy. Since there are lots of small towns in the United? States, a race ensued to see who could be the first to get to each town. ? Therefore, Wal-Mart found itself in a preemption game of the sort illustrated by the payoff matrix attached.
The? game's Nash equilibrium? (equilibria) is? (are) for:
A. Both? Wal-Mart and Company X to enter.
B. Company X to enter and? Wal-Mart to not enter.
C. ?Wal-Mart to enter and Company X to not enter and for? Wal-Mart to not enter and Company X to enter.
D. Wal-Mart to enter and Company X to not enter and for both? Wal-Mart and Company X to enter.
E. ?Wal-Mart to enter and Company X to not enter.
Now suppose? Wal-Mart moves first. What will be the Nash? equilibrium?
The? game's Nash equilibrium? (equilibria) is? (are) for:
A. ?Wal-Mart to enter and Company X to not enter and for? Wal-Mart to not enter and Company X to enter.
B. ?Wal-Mart to enter and Company X to not enter and for both? Wal-Mart and Company X to enter.
C. Both? Wal-Mart and Company X to enter.
D. ?Wal-Mart to enter and Company X to not enter.
E. Company X to enter and? Wal-Mart to not enter.
Company X Enter Don't enter -15 - 15 Enter 60 Wal Mart 50 Don't enter 0Explanation / Answer
Answer 1:
Option C.
When Walmart enters, the best strategy for company X is not to enter and when company X does not enter, the best strategy for Walmart is to enter. Also, when Walmart does not enter, the best strategy for company X is to enter and when company X enters, the best strategy for Walmart is not to enter.
Answer 2:
Option D.
if Walmart moves first, it will earn highest profit by of 60 units by entering. If Walmart enters , the best strategy for company X is not to enter because if it enters it will make loss of -15 as compared to 0 if it does not enter.
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