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5. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Hatte Latte Bean Bruuer Advertise 8,8 Doesn't Advertise 2,15 Advertise Doesn't Advertise 15, 2 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $2 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing ms. If Hatte Latte chooses to advertise, it will earn a profit of $ not advertise. If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a profit of $ If Bean Bruuer advertises, Hatte Latte makes a higher profit if it chooses If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses million if Bean Bruuer does million if Bean Bruuer

5. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Hatte Latte Bean Bruuer Advertise 8,8 Doesn't Advertise 2,15 Advertise Doesn't Advertise 15, 2 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $2 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing ms. If Hatte Latte chooses to advertise, it will earn a profit of $ not advertise. If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a profit of $ If Bean Bruuer advertises, Hatte Latte makes a higher profit if it chooses If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses million if Bean Bruuer does million if Bean Bruuer

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The fill-in-the-blank options are "not to advertise" or "to advertise" Thank you!

If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses Suppose that both firms start off by deciding not to advertise. If the firms act independently, what strategies will they end up choosing? O O O Hatte Latte will choose to advertise and Bean Bruuer will choose not to advertise. OO Both firms will choose to advertise. Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing? Hatte Latte will choose not to advertise and Bean Bruuer will choose to advertise. Both firms will choose not to advertise. Both firms will choose to advertise. Hatte Latte will choose not to advertise and Bean Bruuer will choose to advertise. Hatte Latte will choose to advertise and Bean Bruuer will choose not to advertise. Both firms will choose not to advertise.
Transcribed Image Text:If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses Suppose that both firms start off by deciding not to advertise. If the firms act independently, what strategies will they end up choosing? O O O Hatte Latte will choose to advertise and Bean Bruuer will choose not to advertise. OO Both firms will choose to advertise. Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing? Hatte Latte will choose not to advertise and Bean Bruuer will choose to advertise. Both firms will choose not to advertise. Both firms will choose to advertise. Hatte Latte will choose not to advertise and Bean Bruuer will choose to advertise. Hatte Latte will choose to advertise and Bean Bruuer will choose not to advertise. Both firms will choose not to advertise.
5. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Hatte Latte Bean Bruuer Advertise 8,8 Doesn't Advertise 2, 15 Advertise Doesn't Advertise 15, 2 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $2 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ not advertise. If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a profit of $ If Bean Bruuer advertises, Hatte Latte makes a higher profit if it chooses If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses million if Bean Bruuer does million if Bean Bruuer
Transcribed Image Text:5. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Hatte Latte Bean Bruuer Advertise 8,8 Doesn't Advertise 2, 15 Advertise Doesn't Advertise 15, 2 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $2 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ not advertise. If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a profit of $ If Bean Bruuer advertises, Hatte Latte makes a higher profit if it chooses If Bean Bruuer doesn't advertise, Hatte Latte makes a higher profit if it chooses million if Bean Bruuer does million if Bean Bruuer
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