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**Text Transcription for Educational Website:** --- **Market Simulation: Kellogg and Post Breakfast Cereals** Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. **What is the cooperative equilibrium for this game?** - **A.** The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. - **B.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. - **C.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. - **D.** The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. - **E.** A cooperative equilibrium does not exist for this game. **Explanation of Payoff Matrix:** - **Rows represent** Post's pricing strategy choices: "Price = $4.00" and "Price = $2.50". - **Columns represent** Kellogg's pricing strategy choices: "Price = $4.00" and "Price = $2.50". **Payoff Values:** - Top-left quadrant: If both choose $4.00, Kellogg earns $800 (red) and Post earns $800 (blue). - Top-right quadrant: If Kellogg chooses $2.50 and Post $4.00, Kellogg earns $900 and Post earns $50. - Bottom-left quadrant: If Kellogg chooses $4.00 and Post $2.50, Kellogg earns $50 and Post earns $900. - Bottom-right quadrant: If both choose $2.50, Kellogg earns $350 and Post earns $350. ---

**Text Transcription for Educational Website:** --- **Market Simulation: Kellogg and Post Breakfast Cereals** Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. **What is the cooperative equilibrium for this game?** - **A.** The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. - **B.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. - **C.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. - **D.** The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. - **E.** A cooperative equilibrium does not exist for this game. **Explanation of Payoff Matrix:** - **Rows represent** Post's pricing strategy choices: "Price = $4.00" and "Price = $2.50". - **Columns represent** Kellogg's pricing strategy choices: "Price = $4.00" and "Price = $2.50". **Payoff Values:** - Top-left quadrant: If both choose $4.00, Kellogg earns $800 (red) and Post earns $800 (blue). - Top-right quadrant: If Kellogg chooses $2.50 and Post $4.00, Kellogg earns $900 and Post earns $50. - Bottom-left quadrant: If Kellogg chooses $4.00 and Post $2.50, Kellogg earns $50 and Post earns $900. - Bottom-right quadrant: If both choose $2.50, Kellogg earns $350 and Post earns $350. ---

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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**Text Transcription for Educational Website:** --- **Market Simulation: Kellogg and Post Breakfast Cereals** Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. **What is the cooperative equilibrium for this game?** - **A.** The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. - **B.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. - **C.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. - **D.** The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. - **E.** A cooperative equilibrium does not exist for this game. **Explanation of Payoff Matrix:** - **Rows represent** Post's pricing strategy choices: "Price = $4.00" and "Price = $2.50". - **Columns represent** Kellogg's pricing strategy choices: "Price = $4.00" and "Price = $2.50". **Payoff Values:** - Top-left quadrant: If both choose $4.00, Kellogg earns $800 (red) and Post earns $800 (blue). - Top-right quadrant: If Kellogg chooses $2.50 and Post $4.00, Kellogg earns $900 and Post earns $50. - Bottom-left quadrant: If Kellogg chooses $4.00 and Post $2.50, Kellogg earns $50 and Post earns $900. - Bottom-right quadrant: If both choose $2.50, Kellogg earns $350 and Post earns $350. ---
Transcribed Image Text:**Text Transcription for Educational Website:** --- **Market Simulation: Kellogg and Post Breakfast Cereals** Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. **What is the cooperative equilibrium for this game?** - **A.** The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. - **B.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. - **C.** The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. - **D.** The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. - **E.** A cooperative equilibrium does not exist for this game. **Explanation of Payoff Matrix:** - **Rows represent** Post's pricing strategy choices: "Price = $4.00" and "Price = $2.50". - **Columns represent** Kellogg's pricing strategy choices: "Price = $4.00" and "Price = $2.50". **Payoff Values:** - Top-left quadrant: If both choose $4.00, Kellogg earns $800 (red) and Post earns $800 (blue). - Top-right quadrant: If Kellogg chooses $2.50 and Post $4.00, Kellogg earns $900 and Post earns $50. - Bottom-left quadrant: If Kellogg chooses $4.00 and Post $2.50, Kellogg earns $50 and Post earns $900. - Bottom-right quadrant: If both choose $2.50, Kellogg earns $350 and Post earns $350. ---
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