Two large retail firms, JB Hi5 and Harry No1, compete by setting prices to attract customers. They advertise their products at either a low price (L) or a high price (H). If both firms advertise a low price, they evenly split the market and each earns $3000. If both firms advertise a high price, each firm earns $5000. However, if one firm advertises at a low price and the other one advertises a high price, then the firm with the low price attracts all the customers and earns a profit of $6000. The firm with the high price earns $0. Now assume that in addition to charging a low or a high price, the firms can also follow a price matching policy (PMP). Firms following a policy of price matching advertise a high price, but they promise to sell the product at a low price if the competitor advertises a low price. how to draw this in normal form

Two large retail firms, JB Hi5 and Harry No1, compete by setting prices to attract customers. They advertise their products at either a low price (L) or a high price (H). If both firms advertise a low price, they evenly split the market and each earns $3000. If both firms advertise a high price, each firm earns $5000. However, if one firm advertises at a low price and the other one advertises a high price, then the firm with the low price attracts all the customers and earns a profit of $6000. The firm with the high price earns $0. Now assume that in addition to charging a low or a high price, the firms can also follow a price matching policy (PMP). Firms following a policy of price matching advertise a high price, but they promise to sell the product at a low price if the competitor advertises a low price. how to draw this in normal form

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 5MC

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Two firms produce and sell differentiated products that are substitutes for each other. Their dernand curves are Firm 1:Q, 40-3P,+ P, Firm 2: 0, - 40 - 3P,+ P, Bolh firms have constant marginal costs of $5.00 per unit. Both fims set their own price and take their competitor's price as fixed. Use the Nash equilibrium concept to determine the equiltbirium set of prices. Since Ihe firms ane identical, they wil set the same prices and produce the same quantities. In equibrium, each firm will charge a price of 8 and produce units of output. (Enter your responses rounded to wo decimal places)
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Consider a market in which there are two firms: A and B. Each firm produces a differentiated product and chooses its price Assume that each firm can set price equal to $60 or $70. The payoffs associated with each set of prices are shown If the firms choose price simultaneously, then the Nash equilibrium price for firm A If firm A chooses price first and can commit to that price, then firm A will Firm B's Price is set its price equal to $00 $70 OA. $60, $60 OB. $70, $70 $2700 $2475 $60 OC 570, $60 OD. $60, $70 $2700 $3375 Firm A's Price $3375 $3300 $70 $2475 $3300
Save Answer Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies spit the market and earn $60 million each. If they both advertise, they again split the market, but profits are lower by $20 million since each company must bear the cost of advertisirlg. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $70 million while the company that does not advertise earns only $30 million. What will these two companies do if they behave as individual profit maximizers? Neither company will advertise, and PM Inc. earns $60. One company will advertise, the other will not. Brown Inc. earns $70. Both companies will advertise, and PM Inc. earns $40. Both companies will advertise, and PM Inc. earns $60.
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Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market. If they both advertise, they again split the market, but profits are lower, since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. Refer to Scenario 17-3. What is PM Inc.'s dominant strategy? to advertise only if Brown Inc. does not advertise to refrain from advertising, regardless of whether Brown Inc. advertises to advertise, regardless of whether Brown Inc. advertises to advertise only if Brown Inc. advertises
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