Joe Is the Owner of the 7-11 Mini Mart, Sam

Multiple Choice

Joe is the owner of the 7-11 Mini Mart, Sam is the owner of the SuperAmerica Mini Mart, and together they are the only two gas stations in town. Currently, they both charge $3 per gallon, and each earns a profit of $1,000. If Joe cuts his price to $2.90 and Sam continues to charge $3, then Joe's profit will be $1,350, and Sam's profit will be $500. Similarly, if Sam cuts his price to $2.90 and Joe continues to charge $3, then Sam's profit will be $1,350, and Joe's profit will be $500. If Sam and Joe both cut their price to $2.90, then they will each earn a profit of $900. You may find it easier to answer the following questions if you fill in the payoff matrix below. For both Joe and Sam, ______ is a ______.

A) cutting the price to $2.90; dominated strategy
B) leaving the price at $3; Nash equilibrium
C) leaving the price at $3; dominant strategy
D) cutting the price to $2.90; dominant strategy