a.b.Each firm has four alternative strategies, and a certain profit/payoff is associated witheach strategy. The numbers in the payoff matrix denote firm A's profit (in thousands ofdollars). The total amount of profit that can be earned by the two firms together is$20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000minus firm A's profit. What strategies will the two firms select? Is the game strictlydetermined? If so, how much does each firm gain?B's strategiesA's strategies ↓IncreaseAdvertisingDecreasePriceIncreasePriceAlterProductIncreaseAdvertising011811DecreasePrice81062IncreasePrice71215AlterProduct415312Suppose now that due to a change in consumer preferences, firm A's "Increase Price"strategy pays off better than before when firm B elects to "Decrease Price," that is, thepayoff rises from 6 to 14. What strategies will the two firms now select? Is the gamestrictly determined? If so, how much does each firm gain? If not, show that each firm'sbest strategy changes from one period to the next.

Given, Two Players : Firm A and Firm BFirm A has four strategies : Increase Advertising, Decrease…

Each firm has four alternative strategies, and a certain profit/payoff is associated with each strategy. The numbers in the payoff matrix denote firm A's profit (in thousands of dollars). The total amount of profit that can be earned by the two firms together is $20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000 minus firm A's profit. What strategies will the two firms select? Is the game strictly determined? If so, how much does each firm gain?

Each firm has four alternative strategies, and a certain profit/payoff is associated with each strategy. The numbers in the payoff matrix denote firm A's profit (in thousands of dollars). The total amount of profit that can be earned by the two firms together is $20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000 minus firm A's profit. What strategies will the two firms select? Is the game strictly determined? If so, how much does each firm gain?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

Suppose Proctor & Gamble (PG) and Johnson & Johnson (JNJ) are simultaneously considering new advertising campaigns. Each firm may choose a high, medium or low level of advertising. a. What are each firm’s best responses to its rival’s strategies? b. Does either firm have a dominant strategy? c. What is the Nash equilibrium in this game?
The table given below represents the payoff matrix of firms A and B, when they choose to produce low or high output. In each cell, the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. Firm A Firm B Low Output High Output Low Output 60 50 20 10 High Output 30 40 40 30 Which of the following statements about the two firms must be true? 1. If Firm B produces low output, Firm A will also produce low output. 2. If Firm B produces high output, Firm A will produce low output. 3. If Firm A produces high output, Firm B will also produce high output. 4. If Firm A produces low output, Firm B will produce high output.
What is the difference between a cooperative and a noncooperative game? Give an example of each.
Assume a simultaneous-move game. Firm B Low Price High Price Firm A Low Price 10,10 100,2 High Price 2,100 90, 90 What is the Nash equilibrium of the game?
Economics Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not then the firm that offers the discount will increase its profit. The figure shows the payoff matrix for this game. Alpha Offer Don't offer Alpha eams S60,000 Alpha eams $20,000 What is the Nash equilibrium in this game? Offer Bota earns $60,000 Bota earns $100.000 O A. There is no Nash equilibrium Beta Alpha earns $100.000 Alpha earms $80,000 O B. Beta offers a student discount but Alpha does not Don't OC. Both Alpha and Beta offer a student discount Beta eams $20,000 Beta earns $80,000 offer O D. Alpha offers a student discount but Beta does not
4. Using a payoff matrix to determine the equilibrium outcome Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers. Flashfry Pricing High Low Warmbreeze Pricing High Low 11, 11 2,13 13, 2 10, 10 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $13 million, and Warmbreeze will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms. price, and if Flashfry prices low, Warmbreeze will make more profit if it If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a chooses a price. Considering all of the…
Use the following normal-form game to answer the following questions. a. For what values of x is strategy D (strictly) dominant for player 2? b. For what values of x is strategy B (strictly) dominant for player 1? c. For what values of x is (B, D) the only Nash equilibrium of the game?
Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Рop Hop Advertise Doesn't Advertise Advertise 8, 8 15, 2 Fizzo Doesn't Advertise 2, 15 11, 11 For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $15 million, and Pop Hop will make a profit of $2 million. Assume this is a simultaneous game and that Fizzo and Pop Hop are both profit-maximizing firms. If Fizzo decides to advertise, it will earn a profit of $ million if Pop Hop advertises and a profit of $ million if Pop Hop does not advertise. If Fizzo decides not to advertise, it will earn a profit of $ million if Pop Hop advertises and a profit of $ million if Pop Hop does not advertise. If Pop Hop advertises, Fizzo makes a higher profit if it chooses If Pop Hop doesn't advertise, Fizzo makes a higher…
Bob's Product- Strategy Pizza No Pizza Sam's Product Strategy No Pizza A U Pizza -$10 с -$10 $0 $15 B D $15 $10 $0 $10 Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome? A. There is no Nash equilibrium attainable for this game. B. Cell A represents the only Nash equilibrium possible for this game. C. Cell D represents the only Nash equilibrium possible for this game. D. Cells B and C both represent possible Nash equilibrium outcomes for this game.
What is the Nash Equilibrium of this game? Firm Develop Don't Develop Don't Develop, Protect O Develop, Don't Protect Protect Don't Develop, Don't Protect O Develop, Protect -3,2 1,1 Government Don't Protect 8,10 0,2
Explain why the value of a matrix game is positive if all of the payoffs are positive. A. If the matrix game is strictly determined and all of the payoffs are positive, D=(a+d)−(b+c)will be negative and ad−bcwill be negative. Therefore, the value, v, will be positive. If the matrix game is nonstrictly determined, and all of the payoffs are positive, the saddle value will also be positive. Thus, the value, v, is positive. B. If the matrix game is strictly determined and all of the payoffs are positive, the saddle value will be negative. Thus, the value, v, is positive. If the matrix game is nonstrictly determined, D=(a+d)−(b+c) will be positive and ad−bc will be positive. Therefore, the value, v, will be positive. C. If the matrix game is strictly determined and all of the payoffs are positive, D=(a+d)−(b+c) will be positive and ad−bc will be positive. Therefore, the value, v, will be positive. If the matrix game is nonstrictly determined, and all of the…
Suppose that Green Giant and Red Rover are two companies competing in the canned vegetable market. Each is contemplating Green/Red Ad Campaign No Ad Campaign an aggressive new ad campaign. The payoffs of each decision are listed below, where Green Giant is player 1. Ad Campaign 1 million, 1 million |No Ad Campaign 3 million, zero 2 million, 2 million zero, 3 million Which of the following is true a. Neither Red Rover nor Green Giant has a dominant strategy b. Green Giants best repsone to Red Rover advertising is to not advertise c. Not advertising is the dominant strategy for both Red Rover and Green Giant d. Advertising is the dominant strategy for both Red Rover and Green Giant