EBK MANAGERIAL ECONOMICS
4th Edition
ISBN: 9780100546622
Author: FROEB
Publisher: YUZU
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Question
Chapter 15, Problem 4MC
To determine
Nash equilibrium.
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QUESTION 15
Consider the following information for a simultaneous move game: Two discount stores (megastore and superstore) are interested in expanding their market
share through advertising. The table below depicts the strategic outcomes (profits) of both stores with and without advertising.
Megastore
Superstore
Advertise
Advertise
$95, $80
Don't Advertise $65, $285
b. Megastore $95 and Superstore $80
c. Megastore $65 and Superstore $285
d. Megastore $165 and Superstore $115
Don't Advertise
$305, $55
$165, $115
If the stores could co-operate, what is the new Nash equilibrium?
a Megastore $305 and Superstore $55
O Cell A
O Cell C
O Cell E
O Cell I
None of the above
Suppose that Green Giant and Red Rover are two companies competing in the canned vegetable market. Each is contemplating
an aggressive new ad campaign. The payoffs of each decision are listed below, where Green Giant is player 1.
Green/Red
Ad Campaign
No Ad Campaign
|Ad Campaign
|1 million, 1 million
zero, 3 million
No Ad Campaign
3 million, zero
2 million, 2 million
What is the Nash equilibrium of the game?
a. (advertise, don't advertise)
b. (advertise, advertise)
c. (don't advertise, don't advertise)
d. (don't advertise, advertise)
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