-Refer to the noncooperative, one-time, static game depicted in Figure 2.12. Rah-Rah and 7th Heaven are convenience store chains that are considering opening a franchise in downtown Pawtucket, or just off Interstate 95. Monthly payoffs are in thousands of dollars. If both stores adopt a minimax regret decision rule, what is the equilibrium strategy profile for this game?
A) {Pawtucket, Interstate}
B) {Interstate, Pawtucket}
C) {Pawtucket, Pawtucket}
D) {Interstate, Interstate}

Question

-Refer to the noncooperative, one-time, static game depicted in Figure 2.12. Rah-Rah and 7th Heaven are convenience store chains that are considering opening a franchise in downtown Pawtucket, or just off Interstate 95. Monthly payoffs are in thousands of dollars. If both stores adopt a minimax regret decision rule, what is the equilibrium strategy profile for this game?
A) {Pawtucket, Interstate} 
B) {Interstate, Pawtucket} 
C) {Pawtucket, Pawtucket} 
D) {Interstate, Interstate}

Quizplus · Accepted Answer

In a minimax regret decision rule, each player aims to minimize their maximum regret, which is determined by comparing the actual payoff with the best payoff they could have received under different circumstances. In this scenario, without the specific payoff matrix, we infer that both choosing the same location (either both in Pawtucket or both Interstate) would minimize regret for both, as it avoids scenarios where one significantly outperforms the other by choosing a different location. Since the equilibrium strategy profile must be stable for both players, and without specific numbers, the most neutral assumption is that both choosing the same location leads to minimized regret for both, hence {Interstate, Interstate} is a plausible equilibrium under the assumption of symmetry and the desire to avoid the worst-case scenario.

-Refer to the Noncooperative, One-Time, Static Game Depicted in Figure