Assignment task:
Suppose you are the assistant manager of "Southside Laundromat" in the suburb of Richmond. Your store manager is interested in expanding your store's market share. Particularly, he is interested in increasing the number of machines and operating 24 hours a day. However, you are concerned that your store's profits depend not only on what your store does but also on what your competitor, "North Parham Road Laundromat", is located some 15 blocks from your store's location. There are no other laundromats in the nearby area. At present, both stores have 50 machines each and both stores are open from 10:00 am to midnight. You audit your store's historical account for the past several years and determine that on average your profit is $10,000 per month. Based on your store's experience, you speculate your competitor will also make a profit that is equivalent to yours. You predict if you increase the number of machines and store hours if your competitor does not follow suit, you will gain many of your competitor's customers. In that case, you believe your profit will increase to $15,000 and your competitor's profit will decline to $5,000. On the other hand, you fear if your competitor increases the number of machines and store hours and you fall behind to keep up with him, you will lose many of your customers to him. Even in this unfortunate event, you believe your profit will still be $5,000, while your competitor's profit will increase to $15,000. At the same time, it is also possible that both you and your competitor may end up increasing the number of machines and store hours, in which case although both stores do not lose their customers, both find that their costs increase and profit decline to $7,500 per month. Given the scenario, what are the profits likely to be for your laundromat? How will you decide what you should do? Write a page memo to the manager, explaining what should be done and what is likely to happen.