Roland's Barber Shop and Charley's Barber Shop Are Both Located

question 143

Multiple Choice

Roland's Barber Shop and Charley's Barber Shop are both located in the business district of a certain town. Roland estimates that if he raises the price of a haircut by $1, he will increase his market share by 7% if Charley raises his price by the same amount; he will decrease his market share by 2% if Charley holds his price at the same level; and he will decrease his market share by 7% if Charley lowers his price by $1. If Roland keeps his price the same, he will increase his market share by 4% if Charley raises his price by $1; he will keep the same market share if Charley holds the price at the same level; and he will decrease his market share by 4% if Charley lowers his price by $1. Finally, if Roland lowers the price he charges by $1, his market share will increase by 8% if Charley raises his prices by the same amount; he will increase his market share by 4% if Charley holds his price at the same level; and he will increase his market share by 2% if Charley lowers his price by $1. ​
If neither party is willing to lower the price he charges for a haircut, what strategy should they choose?
​

• A) Roland should hold the price. Charley should hold the price.
• B) Roland should hold the price. Charley should raise the price.
• C) Roland should raise the price. Charley should raise the price.
• D) Roland should raise the price. Charley should hold the price.
• E) The game is not strictly determined.

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Definitions:

Latin American

Referring to countries in the Americas where Romance languages (primarily Spanish and Portuguese) are spoken.

Ottoman Empire

A former Turkish empire that was founded about 1300 by Osman and reached its peak during the 16th and 17th centuries.

Civilian Casualties

Non-military individuals who are injured or killed in a conflict or in a tragic event.

Arms Race

a competition between nations for superiority in the development and accumulation of weapons, especially between the Cold War superpowers.