8. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Creamland Advertises Doesn't Advertise Dairy King Advertises Doesn't Advertise 9,9 3, 15 15,3 11, 11 For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of $ not advertise. If Creamland decides not to advertise, it will earn a profit of $ does not advertise. million if Dairy King advertises and a profit of $ If Dairy King advertises, Creamland makes a higher profit if it chooses million if Dairy King advertises and a profit of $ million if Dairy King does million if Dairy King
8. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Creamland Advertises Doesn't Advertise Dairy King Advertises Doesn't Advertise 9,9 3, 15 15,3 11, 11 For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of $ not advertise. If Creamland decides not to advertise, it will earn a profit of $ does not advertise. million if Dairy King advertises and a profit of $ If Dairy King advertises, Creamland makes a higher profit if it chooses million if Dairy King advertises and a profit of $ million if Dairy King does million if Dairy King
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
Section: Chapter Questions
Problem 9PA
Related questions
Question
![If Dairy King doesn't advertise, Creamland makes a higher profit if it chooses
Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing?
Both firms will choose to advertise.
Creamland will choose not to advertise and Dairy King will choose to advertise.
Both firms will choose not to advertise.
Creamland will choose to advertise and Dairy King will choose not to advertise.
Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?
Creamland will choose not to advertise and Dairy King will choose to advertise.
Both firms will choose not to advertise.
Creamland will choose to advertise and Dairy King will choose not to advertise.
Both firms will choose to advertise.
It might be easier for Creamland and Dairy King to achieve the cooperative outcome of the game if:
The payoffs of the game were doubled
It were difficult to monitor whether the other player was advertising
The game had repeated trials
The payoffs of the game were cut in half](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb09f6dc8-7fba-4a22-8548-444310b38ec3%2F02a22bc3-9f85-49b3-8ab5-d7762892b7cf%2Fw43qxjq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:If Dairy King doesn't advertise, Creamland makes a higher profit if it chooses
Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing?
Both firms will choose to advertise.
Creamland will choose not to advertise and Dairy King will choose to advertise.
Both firms will choose not to advertise.
Creamland will choose to advertise and Dairy King will choose not to advertise.
Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?
Creamland will choose not to advertise and Dairy King will choose to advertise.
Both firms will choose not to advertise.
Creamland will choose to advertise and Dairy King will choose not to advertise.
Both firms will choose to advertise.
It might be easier for Creamland and Dairy King to achieve the cooperative outcome of the game if:
The payoffs of the game were doubled
It were difficult to monitor whether the other player was advertising
The game had repeated trials
The payoffs of the game were cut in half
![8. To advertise or not to advertise
Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars)
each company will earn depending on whether or not it advertises:
Creamland
Dairy King
Advertises Doesn't Advertise
9,9
Doesn't Advertise 3, 15
Advertises
15, 3
11, 11
For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million,
and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing
firms.
If Creamland decides to advertise, it will earn a profit of $
not advertise.
If Creamland decides not to advertise, it will earn a profit of $
does not advertise.
million if Dairy King advertises and a profit of $
If Dairy King advertises, Creamland makes a higher profit if it chooses
million if Dairy King advertises and a profit of $
million if Dairy King does
million if Dairy King](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb09f6dc8-7fba-4a22-8548-444310b38ec3%2F02a22bc3-9f85-49b3-8ab5-d7762892b7cf%2Fcn8pzpq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8. To advertise or not to advertise
Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars)
each company will earn depending on whether or not it advertises:
Creamland
Dairy King
Advertises Doesn't Advertise
9,9
Doesn't Advertise 3, 15
Advertises
15, 3
11, 11
For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million,
and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing
firms.
If Creamland decides to advertise, it will earn a profit of $
not advertise.
If Creamland decides not to advertise, it will earn a profit of $
does not advertise.
million if Dairy King advertises and a profit of $
If Dairy King advertises, Creamland makes a higher profit if it chooses
million if Dairy King advertises and a profit of $
million if Dairy King does
million if Dairy King
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Principles of Microeconomics](https://www.bartleby.com/isbn_cover_images/9781305156050/9781305156050_smallCoverImage.gif)
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Microeconomics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305971493/9781305971493_smallCoverImage.gif)
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Principles of Microeconomics](https://www.bartleby.com/isbn_cover_images/9781305156050/9781305156050_smallCoverImage.gif)
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Microeconomics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305971493/9781305971493_smallCoverImage.gif)
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Principles of Economics, 7th Edition (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781285165875/9781285165875_smallCoverImage.gif)
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning