How to solve using backward induction

Reference no: EM13179855

Two clothing stores in Lowland Mall are approached by a supplier with two lines to offer (say Formal or Casual). The counter and shelf space of each store does not permit them to carry both lines - they must choose one. Bells is approached first, then Follies, and Follies will be informed of Bells' choice. If both choose the Formal line, they will make 0 profits. If they both choose the Casual line, they will each make profits of $1000 per week. If Bells chooses Formal while Follies chooses Casual, then Bells will make $500 and Follies will make $1500 per week. If Bells chooses Casual while Follies chooses Formal, then Bells will lose $100 per week and Follies will make $2000 per week.

(a) Draw the game tree.

(b) Solve using backward induction; give complete strategies for both players (i.e. complete contingency plans).

Reference no: EM13179855

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