Assuming there are two companies selling personal computers,Company Jackfruit Computers and Company Mangoes Computer. They both have an inventory of personal computers that they would like to sell before a new generation of faster, cheaper machines is introduced. The question facing each competitor is whether or not they should widely advertise a “close out” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. The net revenue to each firm in millions of $, is depicted in the payoff matrixbelow: Mangoes Jackfruit Advertise Don’t advertise Advertise M: $5 J: $5 M: $2 J: $20 Don’t advertise M: $20 J: $2 M: $10 J: $10 1. Determine the dominant strategy for each firm 2. Would collusion work in this case? Explain
Assuming there are two companies selling personal computers,Company Jackfruit Computers and Company Mangoes Computer. They both have an inventory of personal computers that they would like to sell before a new generation of faster, cheaper machines is introduced. The question facing each competitor is whether or not they should widely advertise a “close out” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. The net revenue to each firm in millions of $, is depicted in the payoff matrixbelow:
|
Mangoes |
|
||
|
Jackfruit |
|
Advertise |
Don’t advertise |
|
Advertise |
M: $5 J: $5 |
M: $2 J: $20 |
|
|
Don’t advertise |
M: $20 J: $2 |
M: $10 J: $10 |
1. Determine the dominant strategy for each firm
2. Would collusion work in this case? Explain.
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