Coca-Cola and Pepsi both spend large amounts on advertising, but would they be better off if they didn't? Their television commercials and online ads are usually not designed to convey new information about their products. Instead, they are designed to capture each other's customers. Construct a payoff matrix using the following hypothetical information If neither firm advertises, Coca-Cola and Pepsi each earn a profit of $750 million per year If both firms advertise, Coca-Cola and Pepsi each earn a profit of $500 million per year If Coca-Cola advertises and Pepsi doesn't, Coca-Cola earns a profit of $900 million, and Pepsi earns a profit of $400 million If Pepsi advertises and Coca-Cola doesn't, Pepsi earns a profit of $900 million, and Coca-Cola earns a profit of $400 million (a) Illustrate this advertising game with a aid of a well labeled payoff matrix (table) (b) Does Coca-Cola have a dominant strategy? If so, what is it?

Coca-Cola and Pepsi both spend large amounts on advertising, but would they be better off if they didn't? Their television commercials and online ads are usually not designed to convey new information about their products. Instead, they are designed to capture each other's customers. Construct a payoff matrix using the following hypothetical information If neither firm advertises, Coca-Cola and Pepsi each earn a profit of $750 million per year If both firms advertise, Coca-Cola and Pepsi each earn a profit of $500 million per year If Coca-Cola advertises and Pepsi doesn't, Coca-Cola earns a profit of $900 million, and Pepsi earns a profit of $400 million If Pepsi advertises and Coca-Cola doesn't, Pepsi earns a profit of $900 million, and Coca-Cola earns a profit of $400 million (a) Illustrate this advertising game with a aid of a well labeled payoff matrix (table) (b) Does Coca-Cola have a dominant strategy? If so, what is it?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider two oligopolists, each choosing between a “high” and a “low” level of production. Given their choices of how much to produce, their profits will be as follows: Explain how firm B will reason that it makes sense to produce the high amount, regardless of what firm A chooses. Then explain how firm A will reason that it makes sense to produce the high amount, regardless of what firm B chooses. How might collusion assist the two firms in this case?
Four firms (A, B, C, and D) play a pricing game (i.e. Bertrand). Each firm (i) may choose any price P; in [0, infinity) with the goal of maximizing its own profit. (Firms do not care directly about their own quantity or others' profits.) Firms A and B have MC = 10, while firms C and D have MC = 20. The firms serve a market with the demand curve Q = 100 - P. All firms produce exactly the same product, so consumers purchase only from the firm with the lowest price. If multiple firms have the same low price, consumers divide their prices evenly among the low-priced firms. If firms choose price simultaneously: A) a price firm A would choose in equilibrium: a price firm B would choose in equilibrium: B) a price firm C would choose in equilibrium: C) a price firm D would choose in equilibrium:
Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.65) for their soft drinks. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Coke's profits are in red and Pepsi's are in blue. Coke's dominant strategy is to pick a price of dominant strategy is to pick a price of $ What is the Nash equilibrium for this game? A. Coke and Pepsi will both choose a price of $1.25. B. Coke will choose a price of $1.25 and Pepsi will choose a price of $0.65. and Pepsi's O C. Coke will choose a price of $0.65 and Pepsi will choose a price of $1.25. D. Coke and Pepsi will both choose a price of $0.65. Price = $1.25 Pepsi Price = $0.65 Price = $1.25 Price = $0.65 $800 Coke $900 $800 $175 $175 $700 $900 $700
Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q₁. Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose q2 and 93, respectively. Market demand is given by p(Q) = 100 – Q, and Q = 9₁ +9₂ +93. Firm 1's costs are c₁ (9₁) = 1q₁, firm 2's costs are c₂(9₂) = 6q2 and firm 3's costs are C3(93) = 693. Starting from the end of the game, you can express Firm 2's best response function in terms of 9₁ and 93, and you can similarly express Firm 3's best response function in terms of q₁ and q₂. Using these, answer the following questions. a) If Firm 1 chooses q₁ = 9, what quantity will Firm 2 choose? b) If Firm 1 chooses q₁ = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity?
Two firms produce Bliffs. They compete by simultaneously choosing prices in a single period. The demand for Bliffs is given by P(Q) = 100-2Q where Q is market quantity and P is market price. Firm 1 has costs C1(q1) = 20q1 and Firm 2 has costs C2(q2) = 10q2. Which statement is true? In the Nash equilibrium to the game, both firms play dominated strategies None of the other answers are correct O In the Nash equilibrium to the game, both firms play dominant strategies In the Nash equilibrium to the game, both firms slowly lower prices towards marginal costs O In the Nash equilibrium to the game, both firms set price equal to marginal cost
Google and Microsoft are the two dominant firms in the internet search market. They each must decide on whether to have a large budget for research and development (R&D). Their respective payoffs are in the following matrix: Google Microsoft Large R& D Small R& D Large R& D +$30m 0 +$20m +$30m Does google have a dominant strategy? True False Small R& D +$70m +$50m 0 +$40m
I need answer ASAP.Thank you!
I selected answer "B", which was surprisingly incorrect. What say you? What would you pick as the correct choice?
There are two firms in a market and they compete in a Nash-Cournot manner. Firm 1 faces the demand function p1(g1,92) = 200 - 91 - 92, and has a total cost function TC1 = (91)2. Firm 2 faces the demand function p2(91,92) = 160 - 92 - 91, and has a total %3D cost function TC2 = (92)2. Answer each of the following questions. a. Find the Nash-Cournot equilibrim output and price v for firm 1. b. Find the Nash-Cournot equilibrim output v and price v for firm 2.
Suppose that Snapface and Instashot are the only two firms in a hypothetical market that produce and sell polaroid cameras. 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 cameras. Snapface Pricing High Low For example, the lower-left cell shows that if Snapface prices low and Instashot prices high, Snapface will earn a profit of $18 million, and Instashot will earn a profit of $2 million. Assume this is a simultaneous game and that Snapface and Instashot are both profit-maximizing firms. Instashot Pricing High Low 11, 11 2, 18 18, 2 10, 10 If Snapface prices high, Instashot will make more profit if it chooses a high price, and if Snapface prices low, Instashot will make more profit if it chooses a price. If Instashot prices high, Snapface will make more profit if it chooses a chooses a ▼ price. Considering all of the information given, pricing high If the firms do not collude,…
!
!