Suppose there is a small town with two high-end restaurants. Suppose additionally that a major convention is coming to town. The restaurants are deciding whether to create print advertising to distribute at the convention in.order.to advertise their restaurant. • If they both advertise, the advertising will cancel and both restaurants will get the same amount of business as if they had not advertised, so the advertising expense will have been wasted, • If they both choose not to advertise, they will save the cost of advertising. • If one advertises and the other does not, the advertising restaurant will pull business away from its competitor and will end up with higher revenue. The payoff matrix is below.
Suppose there is a small town with two high-end restaurants. Suppose additionally that a major convention is coming to town. The restaurants are deciding whether to create print advertising to distribute at the convention in.order.to advertise their restaurant. • If they both advertise, the advertising will cancel and both restaurants will get the same amount of business as if they had not advertised, so the advertising expense will have been wasted, • If they both choose not to advertise, they will save the cost of advertising. • If one advertises and the other does not, the advertising restaurant will pull business away from its competitor and will end up with higher revenue. The payoff matrix is below.
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
Chapter16: Bargaining
Section: Chapter Questions
Problem 16.1IP
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