Strategic Decision for a Coffee Shop
Consider the payoff matrix below, which shows the daily profits (in hundreds of dollars) for two competing coffee shops based on their decision to offer a loyalty program. The first number in each cell is the payoff for 'The Daily Grind', and the second is for 'Brew & Co.'.
PAYOFF MATRIX (The Daily Grind, Brew & Co.):
| Brew & Co: Loyalty Program | Brew & Co: No Program | |
|---|---|---|
| Daily Grind: Loyalty Program | (20, 18) | (30, 10) |
| Daily Grind: No Program | (15, 25) | (22, 22) |
If you know that 'Brew & Co.' has decided to implement a 'Loyalty Program', what is 'The Daily Grind's' best response? Explain your reasoning by referencing the specific payoffs from the matrix.
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