Two firms commercialize two products that they both compete for. Each firm currently has 50 % of the market share. As the two products have been recently improved, both firms are planning to launch an advertising campaign. If neither firm advertises, their market share remains the same. If one of them launches a more powerful advertising campaign, the other loses a proportional percentage of its customers. Market research indicates that it is feasible to reach 50 % of potential customers by TV, 30 % through the press and 20 % on the radio. a. Develop the payoff matrix b. Indicate the most appropriate advertising strategy for both firms c. Determine the game value
Two firms commercialize two products that they both compete for. Each firm currently has 50 % of the market share. As the two products have been recently improved, both firms are planning to launch an advertising campaign. If neither firm advertises, their market share remains the same. If one of them launches a more powerful advertising campaign, the other loses a proportional percentage of its customers. Market research indicates that it is feasible to reach 50 % of potential customers by TV, 30 % through the press and 20 % on the radio. a. Develop the payoff matrix b. Indicate the most appropriate advertising strategy for both firms c. Determine the game value
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two firms commercialize two products that they both compete for. Each firm currently
has 50 % of the market share. As the two products have been recently improved, both
firms are planning to launch an advertising campaign. If neither firm advertises, their
market share remains the same. If one of them launches a more powerful advertising
campaign, the other loses a proportional percentage of its customers.
indicates that it is feasible to reach 50 % of potential customers by TV, 30 % through the
press and 20 % on the radio.
a. Develop the payoff matrix
b. Indicate the most appropriate advertising strategy for both firms
c. Determine the game value
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