Bruegger’s Bagels and Einstein Bros. Bagels, which students view as very close substitutes, each have a franchise just off campus. The two shops are considering how to price their basic bagel with cream cheese, with the possible outcomes indicated in the payoff matrix.
If the two bagel shops have best responses, what are they?
Payoff Matrix for Bruegger’s Bagels and Einstein Bros. Bagels
Einstein’s bagels cost $4.00
Einstein’s bagels cost $2.50
Bruegger’s bagels cost $4.00
Bruegger’s weekly profits = $2,000
Einstein’s weekly profits = $2,000
Bruegger’s weekly profits = $500
Einstein’s weekly profits = $3,000
Bruegger’s bagels cost $2.50
Bruegger’s weekly profits = $3,000
Einstein’s weekly profits = $500
Bruegger’s weekly profits = $1,000
Einstein’s weekly profits = $1,000
Group of answer choices
Both will charge $2.50.
Both will charge $4.00.
One will charge $4.00, and the other will charge $2.50.
There is no best response for either shop.
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