The Diagram Shows the Extensive Form Version of a Strategic

question 39

Multiple Choice

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. What does this extensive form game indicate about the decision to open a new coffee shop?

• A)The outcome of the game is a prisoner's dilemma.
• B)Neither firm has a first-mover advantage.
• C)Jumbo Java has a first-mover advantage.
• D)Corporate Coffee has a first-mover advantage.

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Definitions:

Investment Center

A business segment whose manager has control over cost, revenue, and investments in operating assets.

Cost Center

A department or segment of a business to which costs can be allocated but does not directly generate revenue.

Profit Center

A segment or department within an organization that is directly responsible for generating profit, measured by its performance.

Selling Division

A segment of a company focused on the sales and distribution of products or services.