Megan and Amanda Are Both 7 Years Old and Operate

question 14

Essay

Megan and Amanda are both 7 years old and operate lemonade stands. Megan lives on the east side of Welch Avenue while Amanda resides on the west side of Welch Avenue. Each morning, the girls must decide whether to place their stand on Welch Avenue or Lincoln Avenue. When they set their stand-up, they don't know what the other will do and can't relocate. If both girls put their stand on Welch, both girls receive $175 in profits. If both girls put their stand on Lincoln, they each receive $75 in profits. If one girl sets their stand on Welch while the other operates on Lincoln, the stand on Welch earns $300 in profits while the stand on Lincoln earns $225. Diagram the relevant payoff matrix. Does either girl have a dominant strategy? Does the game have a Nash equilibrium? What is the maximin strategy of each player in the game?

---

Definitions:

Virtuous Circle

A chain of positive events that reinforce themselves through a feedback loop, leading to further beneficial outcomes.

Rationalization

The process of offering a logical or reasonable explanation for behaviors or decisions that might otherwise appear irrational.

Government Contract

A legally binding agreement between a business and a government entity for the supply of goods or services.

Best Interests

Actions or decisions that are considered most beneficial to the well-being or success of an individual or group.