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. If both players choose their dominated strategy they will each earn ______, and if both players choose their dominant strategy they will each earn ______.

A) $500; $1350
B) $900; $1350
C) $900; $1000
D) $1000; $900