Visa and Mastercard are competing for customers in the consumer credit market. They have two marketing ploys to attract new credit worthy card holders: Offer rewards points or low introductory rates. Visa knows that if it has a better rewards program than Mastercard and that if the both offer rewards, visa will gain 12% share over Mastercard. Visa also knows that Mastercard can sustain low introductory rates longer so if they both offer low introductory rates Visa will lose 10% share. Visa and Mastercard both go with their strong or weak option, neither will gain advantage.
a. Draw Visa's zero-sum game.
b. Use the minmax-maxmin process and determine if there is an equilibrium. Explain your solution or why there is not one.
c. Calculate Visa and Mastercard's mixed strategy equilibrium.