Economics Question help!?

[PeteyPaul]

Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.

If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.

6.1. If All-You-Can-Eat Café and GoodGrub Diner decide to collude, what is the outcome of this game?



A. All-You-Can-Eat Café cleans, and GoodGrub Diner cleans.

B. All-You-Can-Eat Café does not clean, and GoodGrub Diner does not clean.

C. All-You-Can-Eat Café cleans, but GoodGrub Diner does not clean.

D. All-You-Can-Eat Café does not clean, but GoodGrub Diner cleans.