30 Apr Question: . Two interdependent bus companies—City Wheels and Easy Ride—provide transportation services in t…
. Two interdependent bus companies—City Wheels and Easy Ride—provide transportation services in the same city. Following a change in costs that affects both companies, each company must decide whether to lower its fare or maintain its current fare. In the payoff matrix below, the first entry in each cell indicates the daily profit to Easy Ride and the second entry indicates the daily profit to City Wheels. Both companies know all of the information in the matrix.
(a) If Easy Ride chooses to maintain its current fare, which strategy is better for City Wheels? Explain.
(b) Is there a dominant strategy for Easy Ride? Explain.
(c) Assume that the companies must make their decisions simultaneously and do not cooperate. What will be the daily profit for each firm?
(d) If these two firms could cooperate, which strategy would each firm choose?
(e) Suppose that the local government decides to provide a subsidy of $40 per day to the bus companies.
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