|Polar Treat||Polar Treat|
|Frosty Igloo||Uptown||70, 80||60, 80|
|Frosty Igloo||Downtown||90, 60||50, 50|
The payoff matrix above shows the possible profits of Frosty Igloo and Polar Treats, sole competitors in the same local market for frozen desserts. Each producer must choose either an uptown or downtown location. The first entry in each cell shows Frosty Igloo’s expected profit while the second entry shows Polar Treat’s expected profit.
Suppose that Polar Treat markets a new product that would raise its earnings by 15 if it locates downtown. In this case, what would be Frosty Igloo’s likely profit?