Pemberton Case

BACKGROUND INFORMATION

Pemberton is a quaint little town located in the heartland of our great country. Although it is only a 30-minute drive to a major metropolitan center, most of the townfolk prefer to do their shopping at one of the two general stores located in Pemberton. At these stores, one can buy a variety of goods, ranging from groceries to hardware equipment. Both establishmentsboast a soda fountain, which is quite popular among both the younger and older generations as well.
Like most small towns, Pemberton is proud of the fact that it has been able to preserve its many traditions, some of which date back to the 1890s. One of these grand traditions, which became official in 1923 when the Town Hall passed a resolution to this effect, is the cessation of allcommercial activity on Sunday. Times have changed, however, and "Sunday shoppers" are becoming more and more prevalent. In fact, every Sunday there is a mass exodus to the nearby metropolitan center, where Sunday shopping has been permitted for years.
You are a member of the management team from one of the two general stores in Pemberton. Both the Country Market and the Corner Store have beenconsistently losing potential profit as Sunday shopping becomes more popular. Your management team, as well as the team from the competing general store, has recently contemplated opening the store on Sunday, in spite of the municipal resolution that prohibits this.
The ramifications of such decisions are important, since the profitability of such an action will depend on the decision made by thecompeting store. For instance, if neither store decides to open on Sunday, it will be business as usual, and both stores will make a profit of $20,000 in a given week.
If only one store decides to open on Sunday, that particular store would enjoy the patronage of all those Sunday shoppers and would manage to make a $40,000 profit for the week. Unfortunately, the store that decided to remain closedon that Sunday would actually incur a loss of $40,000 that week. This would be due to various reasons, most notably the preference of customers to continue to do their shopping throughout the week at the store that remained open on Sunday.
If both stores decided to stay open on Sunday, adverse consequences would be faced by both establishments. Although Town Hall may be able to turn a blindeye to one store violating the municipal resolution, two stores would be looked upon as a conspiracy against the traditionalists of Pemberton. Artemus Hampton, Pemberton’s mayor and direct descendant of one of the town’s founders, would no doubt pressure Town Hall into levying the highest possible fine allowable by law. In this case, the penalty would be so excessive that both stores would incurlosses of $20,000 each for the week. While your lawyers have suggested that the municipal resolutions prohibiting Sunday shopping in Pemberton might be overturned in a court case, this too would be a costly option. In either case, if both stores open on Sunday, they will each incur losses of $20,000 for the week.
Keeping the above information in mind, your team is to decide each week, for thenext 12 weeks, whether your store is to remain open on the Sunday of that week. The decision made for the first week must be made without prior consultation with the management team of the competing store. Subsequent decisions may be made after consulting with your competitors. Both teams shall reveal their decisions simultaneously. Remember, the goal is to maximize profits over the next 12-weekperiod.






| | |Country Market |
| | |Close Sunday |Open Sunday |
| |Close |Corner: |+$20,000 |Corner: |- $40,000 |
|Corner |Sunday |Country: |+$20,000 |Country: |+$40,000...