Suppose Mattel, the producer of Barble dolls and accessorles (sold separately), has two types of consumers who purchase Its dolls: low-valueconsumers and high-value consumers. Each of the low-value consumers tends to purchase one doll and one accessory, with a total willingness to payof $44. Each of the high-value consumers buys one doll and two accessorles and Is willing to pay $82 In total.Mattel Is currently considering two pricing strategles:• Strategy 1: Sell each doll for $22 and each accessory for $22• Strategy 2: Sell each doll for $6 and each accessory for $38In the following table, Indicate the revenue for a low-value and a high-value customer under strategy I and strategy 2. Then, assuming each strategyis applied to one low-value and one high-value customer, indicate the total revenue for each strategy.Revenue from Low-ValueRevenue from High-ValueTotal Revenue fromCustomersCustomersStrategy$44 Value, 1 AccessoryS82 Value, 2 Accessories(s)($)(s)Strategy 1$22 doll + $22accessoryStrategy 2$6 doll + S38 accessoryThe strategy that generates the most revenue is strategy00

Gross revenue, is how much cash your business creates from selling your items or administrations…

cegy 1: Sell each doll for $22 and each accessory for $22 egy 2: Sell each doll for $6 and each accessory for $38 owing table, indicate the revenue for a low-value and a high-value customer under strategy I and strategy 2. Then, assuming each strategy to one low-value and one high-value customer, indicate the total revenue for each strategy. Revenue from Low-Value Revenue from High-Value Total Revenue from Customers Customers Strategy $44 Value, 1 Accessory S82 Value, 2 Accessories (s) ($) ($) y 1 loll + $22 sory

cegy 1: Sell each doll for $22 and each accessory for $22 egy 2: Sell each doll for $6 and each accessory for $38 owing table, indicate the revenue for a low-value and a high-value customer under strategy I and strategy 2. Then, assuming each strategy to one low-value and one high-value customer, indicate the total revenue for each strategy. Revenue from Low-Value Revenue from High-Value Total Revenue from Customers Customers Strategy $44 Value, 1 Accessory S82 Value, 2 Accessories (s) ($) ($) y 1 loll + $22 sory

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Player B Strategy 1 2 Player A Strategy 1 $2,400, $1,200 -$1,200, -$2,400 2 -$2,400, -$1,200 $1,200, $2,400 Does Player A have a dominant strategy? Yes or no? Does player B have a dominant startegy? Yes or No?
3. A dominant strategy is a strategy that a. results in the highest payoff for all parties. b. has a higher payoff than alternative strategies some of the time and lower payoff than alternative strategies the rest of the time. c. has a lower payoff than any other strategy, no matter what the other player does d. has a higher payoff than any other strategy, no matter what the other player does
6. 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 11, 11 15, 2 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $15 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. Low 2, 15 8,8 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 information given, pricing low True O False If the firms do not collude, what…
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Problem 3. For the following extensive form games (a) Find all the SPES of the following extensive-form games. (b) Turn each game into its strategic form and find all the PNES. Do they make sense in the initial game? (i) A M B C D E F G (1,0) (0, 1) (1,2) (4, 2) (2,0) (5, –1) (ii) L1 R1 (2,1) L2 R2 (1,2) L R (4, 1) (3,3) 2) (-)
8. Collusive outcome versus Nash equilibrium Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $13,000; alternatively, if they both hire workers to clean, each will earn only $10,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $18,000, and the other restaurant will make only $6,000. Complete the following payoff matrix using the information just given. (Note: All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms.) All-You-Can-Eat Café Cleans Up Doesn't Clean Up $ GoodGrub…
9. For the payoff matrix below, consider a sequential version of the game in which Player 2 moves first and then Player 1 moves second. Which of the following is not a correct statement? Player 1 Top Center Bottom Left 1,2 5,1 6,0 Player 2 Middle 7,1 11,2 -4,3 Right 10,4 1,0 8,5 The subgame perfect payoffs coincide with those of a Nash equilibrium b. Depending on Player 2's move, Player 1 will sometimes optimally choose Bottom c. Player 2 will choose Right in the subgame perfect equilibrium d. Player 2 would be willing to pay a positive $ amount to move first rather than second e. Player 1 would be willing to pay a larger $ amount than Player 2 to move first
Offer Bud Light Don't Offer New Ads New Ads Offer New Ads B: $100 B: $50 M: $100 M: $200 Miller Lite Don't Offer New Ads B: $200 M: $50 B: $120 M: $120 Refer to Table 14.2.4. The marketers of Budweiser Light beer and Miller Lite beer must decide whether or not to offer new advertising campaigns promoting their products. The payoffs in the table are the economic profit made by Bud and Miller. Which one of the following observations is correct? This game has no Nash equilibrium. Bud has a dominant strategy but Miller does not. This game has no dominant strategies. Bud and Miller each have a dominant strategy. Miller has a dominant strategy but Bud does not.
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