Question

You, a real-estate developer, own a piece of land in Nassau, Bahamas, next to an equal-size piece of land owned by a competitor. Both of you have the choice of building a casino or a hotel. Your payoffs in millions of dollars are as follows:You

Your Competitor Casino Hotel Casino 3,3 20,5Hotel 5,20 2,2How much is it worth to you to get your casino building permit first?a. $2 millionb. $3 millionc. $15 milliond. $17 million

Answer 1

Answer: c. $15 million

Step-by-step explanation:

If you get your casino building first, your competitor will have to get the Hotel so as to make $5 million which is more than the $3 million if they were to choose a casino as well.

The Payoff for you would therefore be $20 million and for them $5 million.

The Net Payoff over your competitor would be = 20 - 5

= $15 million