For the situation identify the two players and their possibl

For the situation identify the two players and their possible choices and construct a payoff matrix for their conflict. Andersonville has two gas stations, Ralph\'s Qwik-Serv and Charlie\'s Gas-n-Go. Both Ralph and Charlie are considering raising prices by 1 A, staying with their current prices or lowering prices by 1A. If they both make the same choice, there will be no change in their market shares, but if they make different choices, the one with the lower price will gain 4% of the market for each penny difference in their prices.

Solution

The pay-off matrix with respect to player Ralph is given below:

(No change is shown by 0 %)

			Charlie
		R	S	L
	R	0 %	- 4 %	- 8 %
Ralph	S	4 %	0 %	- 4 %
	L	8 %	4 %	0 %