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13. Podunk City has two

coffee shops and everyone in the city buys one cup of coffee per
day. The owners Enter question
of these shops can serve Maxwell
House Coffee or they can serve
Le Fru
FruGourmet Coffee (simplifying
assumption—suppose they
charge
the same price for either cup of coffee). Assume that customers
strictly
prefer Le Fru
Fru coffee so that if one firm
offers Le Fru
Fru and the other doesn’t,
all
customers will go to
the Fru
Fru shop (the other shop earns 0 profits). When both firms offer
Maxwell House, each firm makes Continue to post
$30 profit each period. Changing
to Le Fru
Fru coffee increases a
firm’s costs by $10
each
period so if they
17 questions remaining
both sell Le Fru
Fru, both make $20 profit.

a) Draw a payoff matrix

associated with this game. (1 pts)
b)
What is the Nash equilibrium outcome? (1 pt)
Snap a photo from your
c)
If these two firms could act as a cartel, which coffee type would
they both agree to sell? (1 pt) phone to post a question
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