You Are the Manager of Copies Are Us

question 88

Essay

You are the manager of Copies Are Us.The only other copy store in town,the Carbon Copy,recently got bids on adding a color copier.You must decide whether to obtain a color copier,but you can base your decision on what your rival does.If your rival adds a color copier and you don't,you expect your profits to fall by $1,000 per week and its profits to rise by $1,500 per week.Conversely,if you add the color copier and your rival does not,your profits will increase by $1,500 per week and your rival's profits will fall by $1,000 per week.However,if you both do the same thing (add color copies or not),you each expect profits to stay at their current level.Show the extensive form of this game,and find the Nash equilibrium (or equilibria).Is there a subgame perfect equilibrium?

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Definitions:

Evolutionary Psychology

A theoretical approach in the social and natural sciences that examines psychological structure from a modern evolutionary perspective.

Adaptive Value

The extent to which a trait or behavior increases the chances of survival and reproduction of an organism in its environment.

Behavioral Genetics

The field of study that examines the role of genetics in human (and animal) behavior, often looking at genetic and environmental influences.

Narcissism

A personality trait characterized by an exaggerated sense of self-importance and a lack of empathy for others.