5. To advertise or not to advertiseSuppose that two firms, Frankencakes and Thinley's, are the only sellers of crepes in some hypothetical market. The following payoff matrix gives theprofit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise:FrankencakesThinley'sAdvertise Doesn't AdvertiseAdvertise9,9Doesn't Advertise 3,15For example, the lower left cell of the matrix shows that if Thinley's advertises and Frankencakes does not advertise, Thinley's will make a profit of $15million, and Frankencakes will make a profit of $3 million. Assume this is a simultaneous game and that Frankencakes and Thinley's are both profit-maximizing firms.advertiseIf Frankencakes chooses to advertise, it will earn a profit of 515,311.11If Frankencakes chooses not to advertise, it will earn a profit of Snot advertise.Both firms will choose to advertiseO Both firms will choose not to advertise.million if Thinley's advertises and a profit of 5Both firms will choose not to advertise,Both firms will choose to advertisemillion if Thinley's advertises and a profit of 5million if Thinley's does not.If Thinley's advertises, Frankencakes makes a higher profit if it choosesIf Thinkey's doesn't advertise, Frankencakes makes a higher profit if it choosesSuppose that both firms start off by deciding not to advertise. If the firms act independently, what strategies will they end up choosing?O Frankencakes will choose not to advertise and Thinley's will choose to advertiseFrankencakes will choose to advertise and Thinley's will choose not to advertisemillion if Thinley's doesAgain, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?Frankencakes will choose to advertise and Thinley's will choose not to advertiseO Frankencakes will choose not to advertise and Thinley's will choose to advertise

Pay-off matrix: There are 2 players: Frankecakes and Thinleys. Strategy set: {Advertise, Does not…

Suppose that two firms, Frankencakes and Thinley's, are the only sellers of crepes in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Frankencakes Advertise Thinley's Advertise Doesnt Advertise Doesn't Advertise 3,15 15,3 11, 11 For example, the lower left cell of the matrix shows that it Thinley's advertises and Frankencakes does not advertise, Thinley's will make a profit of $15 million and Frankencakes will make a profit of $1 million. Assume this is a simultaneous name and that Frankencakes and Thinley's are both profit

Suppose that two firms, Frankencakes and Thinley's, are the only sellers of crepes in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Frankencakes Advertise Thinley's Advertise Doesnt Advertise Doesn't Advertise 3,15 15,3 11, 11 For example, the lower left cell of the matrix shows that it Thinley's advertises and Frankencakes does not advertise, Thinley's will make a profit of $15 million and Frankencakes will make a profit of $1 million. Assume this is a simultaneous name and that Frankencakes and Thinley's are both profit

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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