Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Textbook Question
Chapter 20.A, Problem 1QE
Netflix and Hulu each expects profit to rise by $100,000 in the coming year. Netflix, thinking that it would like its net profit to rise by more, considers advertising during the Super Bowl. An advertisement on the Super Bowl will cost $80,000. If Netflix advertises, and Hulu does not, it expects its profit to rise by $230,000 instead of $100,000, while Hulu’s profit will rise by only $50,000. Netflix also knows that if it does not advertise, but Hulu does, its profit will rise by only $50,000 while Hulu’s profit will rise by $230,000 instead of just $100,000. If both firms advertise, their profit will rise by the same as if neither had advertised, except each will have spent $80,000 for the ad.
- a. Develop the payoff matrix for the decision facing Netflix and Hulu.
- b. Is there a dominant strategy?
- c. If so, what is it?
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In 1896, Colgate dental cream was introduced in tubes similar to those we use now. Today, the Colgate-Palmolive Company’s brand of toothpaste is the best-selling toothpaste in the world (ahead of the Crest brand marketed by Procter & Gamble, which was introduced in 1955).
While Colgate and Crest enjoy the lion’s share of the toothpaste market, if you view the oral care shelf at your local drugstore or supermarket, you will find over a hundred different varieties of toothpaste. Colgate alone sells over 40 different varieties that are marketed under names ranging from Shrek Bubble Fruit to Colgate Total Advanced Whitening.
The high level of product differentiation in the toothpaste market stems from firms introducing new varieties in an attempt to boost their economic profits. In environments where makers of other brands (such as Crest) can easily enter profitable segments of the market, a profitable strategy is to attempt to quickly cover that segment (introducing Shrek Bubble Fruit…
In 1896, Colgate dental cream was introduced in tubes similar to those we use now. Today, the Colgate-Palmolive Company’s brand of toothpaste is the best-selling toothpaste in the world (ahead of the Crest brand marketed by Procter & Gamble, which was introduced in 1955). While Colgate and Crest enjoy the lion’s share of the toothpaste market, if you view the oral care shelf at your local drugstore or supermarket, you will find over a hundred different varieties of toothpaste. Colgate alone sells over 40 different varieties that are marketed under names ranging from Shrek Bubble Fruit to Colgate Total Advanced Whitening.
The high level of product differentiation in the toothpaste market stems from firms introducing new varieties in an attempt to boost their economic profits. In environments where makers of other brands (such as Crest) can easily enter profitable segments of the market, a profitable strategy is to attempt to quickly cover that segment (introducing Shrek Bubble…
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;
Chapter 20 Solutions
Microeconomics
Ch. 20.1 - Prob. 1QCh. 20.1 - Prob. 2QCh. 20.1 - Prob. 3QCh. 20.1 - Prob. 4QCh. 20.1 - Prob. 5QCh. 20.1 - Prob. 6QCh. 20.1 - Prob. 7QCh. 20.1 - Prob. 8QCh. 20.1 - Prob. 9QCh. 20.1 - Prob. 10Q
Ch. 20.A - Netflix and Hulu each expects profit to rise by...Ch. 20.A - Prob. 2QECh. 20 - Prob. 1QECh. 20 - Prob. 2QECh. 20 - Prob. 3QECh. 20 - Prob. 4QECh. 20 - Prob. 5QECh. 20 - Prob. 6QECh. 20 - Prob. 7QECh. 20 - Prob. 8QECh. 20 - Prob. 9QECh. 20 - Prob. 10QECh. 20 - Prob. 11QECh. 20 - Prob. 12QECh. 20 - Prob. 13QECh. 20 - Prob. 14QECh. 20 - Prob. 15QECh. 20 - Prob. 16QECh. 20 - Prob. 1QAPCh. 20 - Prob. 2QAPCh. 20 - Prob. 3QAPCh. 20 - Prob. 4QAPCh. 20 - Prob. 5QAPCh. 20 - Prob. 6QAPCh. 20 - Prob. 1IPCh. 20 - Prob. 2IPCh. 20 - Prob. 3IPCh. 20 - Prob. 4IPCh. 20 - Prob. 5IPCh. 20 - Prob. 6IPCh. 20 - Prob. 7IP
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