(Use for questions 1 - 3): Two soap producers, the Fortnum Company and the Maison Company, can stress either newspapers or magazines in their forthcoming advertising campaigns The payoff matrix (profit in millions of dollars) is as follows: Maison Company Stress Magazines Stress Newspapers M, $8M F, S7M M, $9M F, $8M Stress Newspapers Fortnum Company М, $8M F, $9M М, $7M F, $8M Stress Magazines Is there a dominant strategy for each firm? If so, what is it? a. Maison dominant Magazines, Fortnum dominant Magazines Maison dominant Magazines, Fortnum dominant not dominant C. Maison not dominant, Fortnum not dominant d Maison not dominant, Fortnum dominant Magazines e.Maison dominant Newspapers, Fortnum dominant Newspapers f. Maison dominant Magazines, Fortnum dominant Newspapers g. Maison dominant Newspapers, Fortnum not dominant h. Maison not dominant, Fortnum dominant Newspapers

(Use for questions 1 - 3): Two soap producers, the Fortnum Company and the Maison Company, can stress either newspapers or magazines in their forthcoming advertising campaigns The payoff matrix (profit in millions of dollars) is as follows: Maison Company Stress Magazines Stress Newspapers M, $8M F, S7M M, $9M F, $8M Stress Newspapers Fortnum Company М, $8M F, $9M М, $7M F, $8M Stress Magazines Is there a dominant strategy for each firm? If so, what is it? a. Maison dominant Magazines, Fortnum dominant Magazines Maison dominant Magazines, Fortnum dominant not dominant C. Maison not dominant, Fortnum not dominant d Maison not dominant, Fortnum dominant Magazines e.Maison dominant Newspapers, Fortnum dominant Newspapers f. Maison dominant Magazines, Fortnum dominant Newspapers g. Maison dominant Newspapers, Fortnum not dominant h. Maison not dominant, Fortnum dominant Newspapers

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell tablets: Padmania and Capturesque. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its tablets.
[The soft drink industry is dominated by two cola firms- DEW and HEW. The market is worth $8 billion. Each firm can decide whether to advertise or not, but advertising costs $2 billion to any firm undertaking it. Moreover, advertising will create only negligible new demand as the market is already saturated. So, for the purpose of this question, assume that the market remains at $8 billion regardless of advertising. If one firm advertises and the other does not, then the former captures the whole market. If both firms advertise, then DEW captures 60% of the market and HEW captures 40% of the market, but the advertising must be paid for. If neither firm advertises, then the market is again split 60:40, with 60% going to DEW and 40% to HEW.] [Draw the payoff matrix for this game where each player’s payoff is equal to the value of market it captures less the cost of advertisement. [Do any of the firms have dominant strategies? If so, what are they? Is there a dominant strategy…
[The soft drink industry is dominated by two cola firms- DEW and HEW. The market is worth $8 billion. Each firm can decide whether to advertise or not, but advertising costs $2 billion to any firm undertaking it. Moreover, advertising will create only negligible new demand as the market is already saturated. So, for the purpose of this question, assume that the market remains at $8 billion regardless of advertising. If one firm advertises and the other does not, then the former captures the whole market. If both firms advertise, then DEW captures 60% of the market and HEW captures 40% of the market, but the advertising must be paid for. If neither firm advertises, then the market is again split 60:40, with 60% going to DEW and 40% to HEW.] Draw the payoff matrix for this game where each player’s payoff is equal to the value of market it captures less the cost of advertisement. (please explain how you calculate the payoff matrix)
14. Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets. The government imposes a new $5 million tax to open retail outlets. What is the expected outcome of the new payoff matrix, given the tax? The Nash equilibrium is for Company A to not open retail outlets and for Company B to open retail outlets. The Nash equilibrium is for Company A to open retail outlets and for Company B to not open retail outlets. The Nash equilibrium is for both Company A and Company B to open retail outlets. The Nash equilibrium is for both Company A and Company B to not open retail outlets. There is no Nash equilibrium after the change given in the scenario.…
Exercise 3: merger example Algoma Steel Inc. and Stelco Steel Inc. Merger? Suppose you work at the Bureau and your task is to assess a proposed merger between Algoma Steel Inc. and Stelco Steel Inc. For simplicity, these are the only two firms in Canada. The cost of this merger is that the two firms will become one joint firm, or the duopolists become the monopolist. This is likely to limit consumer choices and the equilibrium price is likely to rise. However, this merger is likely to increase economies of scale, or production cost will fall. From existing studies you know the following information, and P is the price per ton of steel and Q is the number of tons of steel. Demand for steel: P = 1,800 - Q Marginal revenue: MR = 1,800 - 2Q Supply of steel: MC = ATC = 600, identical across the two firms. Case #1: Before Merger - Cournot duopoly - the government does not intervene The total surplus (TS), defined as the sum of consumer surplus and producer surplus, is equal to…
Please answer # 5 only. The profits of the four major networks (CBS, NBC, ABC and Fox) depend significantly on the ratings of its prime time shows. The higher the ratings, the higher the price the network can charge for advertising and the higher the profits of the network. To keep things simple, we will focus on two networks, CBS and NBC, and two of the prime time spots, 8-9PM and 9-10PM. Each network needs to decide which time slot to place its hit show, 8-9PM or 9-10PM. The other time slot will be filled by a run of the mill show. The following payoff matrix shows the total number of viewers (in millions) if each network places its hit show in each of the time slots: CBS 8-9PM time slot 9-10PM time slot NBC 8-9PM time slot 100, 110 85, 120 9-10PM time slot 120, 40 70, 90 If you are the program manager for CBS, what time slot would you place your hit TV show (assuming that your goal is to maximize the number of viewers)? Please explain…
Exercise 6.6. Consider a duopoly in which companies compete according to Cournot's model. The inverse market demand curve is: P(Q)=100-Q , where Q=Q1+Q2 and the average and marginal costs of firms are constant and equal to 40 Calculate profits would each company make? How much would company 1 be willing to invest to reduce its CM from 40 to 25, assuming company 2 does not support it? Graphically show and comment on all results.
10. Game theory terminology Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix/Table Prisoners' Dilemma Game A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again A case in which individually rational behaviour leads to a jointly inefficient outcome A player's best choice, if it exists, regardless of his or her opponent's strategy
Assume the market for a product can be described as a Cournot duopoly with two identical firms. The Nash-equilibrium in this market is that the two firms produce the same quantity. Hence, they will have identical market shares, each will have 50%. Assume that firm 1 decides to invest in a technology that reduces its marginal costs. a) What will happen to the two firms market shares? You must explain how you find the answer. b) What will happen to total production and the price of the product? Again, explain your answer.
5. To advertise or not to advertise Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises:
1.Microsoft is one of the leading software companies. Prior to 2000, Microsoft’s share of the market for personal computer operating systems stood above 80 per cent. However, since the twenty-first century Microsoft’s market share has steadily declined to 40 per cent. This is due to the rise in competing software producers such as Apple macOS (10%), Google's Android OS (35%), Linux Operating System (35%), and Apple iOS (5%). The market share of each company is provided in parentheses. Google and Linux have decided that it would be in their best interest to work together to serve the market. This is not common knowledge to the person’s outside of the companies. i. Draw how equilibrium price and quantity are determined in this industry. Hi does this refer to the monopoly market structure diagrams? 2. Allsmart’s demand curve is given by Q=10-P for its dishwashers. The marginal and average cost is $3 per dishwasher produced. Complete the following table. Photo below concerns…
Q13 George and Jerry are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of €3,000. If they both advertise on radio, each will earn a profit of €5,000. If neither advertises at all, each will earn a profit of €10,000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn €4,000 and the other will earn €2,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn €8,000 and the other will earn €5,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn €9,000 and the other will earn €6,000. If both follow their dominant strategy, then George will: (a) advertise on TV and earn €3,000; (b) advertise on radio and earn €5,000; (c) advertise on TV and earn €8,000; (d) not advertise and earn €10,000;