Why do fast-food restaurants tend to cluster in the same location Suppose that two fast-food franchises, A and B, initia

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Why Do Fast Food Restaurants Tend To Cluster In The Same Location Suppose That Two Fast Food Franchises A And B Initia 1 (237.09 KiB) Viewed 13 times

Why do fast-food restaurants tend to cluster in the same location Suppose that two fast-food franchises, A and B, initially locate near each other in the center of town. The state recently opened a new exit ramp from the nearby interstate highway. Although both restaurants are operating profit- ably, the restaurant owners calculate that by relocating near the intestate highway they will continue to receive some in-town business, but will benefit from sales to drivers using the exit as a rest stop. There are four possible strategy profiles: {Exit ramp, Exit ramp), (Exit ramp, Downtown}, {Downtown, Exit ramp), and (Downtown, Downtown). The respective pay- offs for (A, B), which are in millions of dollars are: (0.15, 0.15), (1.0, 0.1), (0.1, 1.0), and (0.25, 0.15). a. Does either player have a strictly-dominant strategy? b. Does this game have a Nash equilibrium strategy profile? c. Are these restaurants better off by forming a coalition? Is this coalition stable?