Question: Megan and Amanda are both 7 years old and operate lemonade stands.

Megan lives on the east side of Welch and Amanda resides on the west side of the north-south street. Each morning, the girls must decide whether to place their stand on Welch Avenue or Lincoln. 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 profits (big profit business for 7 year old girls – don’t you think!!). 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 girl operates on Lincoln, the stand on Welch earns $300 in profits while the stand on Lincoln earns $225.

a. Diagram the relevant payoff matrix. (5 points)

b. Does either girl have a dominant strategy? (4 points)

c. Does the game have a Nash equilibrium? (4 points)

d. What is the maximin strategy of each player in the game? (4 points)