4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of advertising. They have two choices - advertise (A) or don't advertise (DA). Remember advertising costs money and hence reduces profits. Decisions are made independently without communication between the 2 firms. The table below gives the payoff (profits in thousands of dollars) for each firm in the order (Coca Cola, Pepsi). Coca Cola DA A Pepsi DA (50, 50) (75,0) A (0,75) (25, 25) Assuming the game is only played once, what is the best move for each player? What is the Nash equilibrium of the game?

4. Assume that Coca Cola and Pepsi are deciding on whether to invest in a new round of advertising. They have two choices - advertise (A) or don't advertise (DA). Remember advertising costs money and hence reduces profits. Decisions are made independently without communication between the 2 firms. The table below gives the payoff (profits in thousands of dollars) for each firm in the order (Coca Cola, Pepsi). Coca Cola DA A Pepsi DA (50, 50) (75,0) A (0,75) (25, 25) Assuming the game is only played once, what is the best move for each player? What is the Nash equilibrium of the game?

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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3. Describe some interaction your company has with another entity (firms producing complementary or substitute products, upstream sup- pliers, or downstream customers), or between internal divisions within your firm that can be described as a sequential or simultaneous game. Diagram the strategies, players, and compute payoffs as best you can. Compute the Nash equilibria. What can you do to change the rules of the game to your advantage? Compute the profit consequences of your advice.
2. Suppose that two firms, an incumbent and a potential entrant, compete in a market. If they both operate, the resulting profits for the incumbent and the potential entrant are $30 million and $5 million, respectively. If the potential entrant decides not to enter the market, the resulting profits for the incumbent and potential entrant are $100 million and SO, respectively. Assume that it is not an option for the incumbent to exit the market (a) Which of the two possible outcomes (for the potential entrant to enter or not enter) are Pareto efficient? (b) Now suppose there are side payments available Which of the two possible outcomes is Pareto efficient? (c) Is it possible that the incumbent will agree to pay for the introduction of side payments? (d) Now suppose that side payments are allowed, but it costs $80 million in legal fees to actually use them. Which of the two possible outcomes (for the potential entrant to enter or not enter) are Pareto efficient allocations? (For…
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ABC Inc. Offer Rebate No Rebate XYZ Corp Offer Rebate 20. 10 30.0 No Rebate 12.16 20,4 Which of the following is true about the game above? Lutfen birini seçin. O A Both ABC and XYZ offer a rebate as a dominant strategy OB ABC's dominant strategy is not offer a rebate, O C ABCS dominant strategy is to cffer a rebate. O D XYZE dorninant strategy is to offer a rebate.
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5. To advertise or not to advertise 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 10, 10 18, 2 Fizzo Doesn't Advertise 2, 18 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 $18 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 S 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…
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