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Predicting Strategic Outcomes
Consider the following strategic interaction between two competing coffee shops, Bean Haven and Mocha Spot. They must simultaneously decide whether to introduce a loyalty card program. The table below shows their weekly profits (in thousands of dollars) based on their choices. The first number in each cell is Bean Haven's profit, and the second is Mocha Spot's profit.
| Mocha Spot: Loyalty Card | Mocha Spot: No Card | |
|---|---|---|
| Bean Haven: Loyalty Card | (50, 50) | (90, 30) |
| Bean Haven: No Card | (30, 90) | (70, 70) |
Analyze the choices for each shop and predict the most likely outcome of this game. Explain your reasoning by describing each firm's decision-making process.
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