IL2 Companies A and B can compete on advertising or R&D. The profits (in millions of $ million) of the two firms are given in the table below assumig that they play a one-shot simultancous move game (the profit or firm A is listed first in every cell of the matrix, followed by the profit of firm B): A\B Advertising R&D Advertising R&D 50, 25 10, 70 60, 35 1. Find the mixed strategy equilibrium. 20, 40 2. What are the expected profits for both firms in this equilibrium?
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- 12. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Bean Bruuer Advertise Doesn't Advertise Advertise Hatte Latte Doesn't Advertise 9,9 3,15 15,3 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $3 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer…Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Рop Hop Advertise Doesn't Advertise Advertise 8, 8 15, 2 Fizzo Doesn't Advertise 2, 15 11, 11 For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $15 million, and Pop Hop will make a profit of $2 million. Assume this is a simultaneous game and that Fizzo and Pop Hop are both profit-maximizing firms. If Fizzo decides to advertise, it will earn a profit of $ million if Pop Hop advertises and a profit of $ million if Pop Hop does not advertise. If Fizzo decides not to advertise, it will earn a profit of $ million if Pop Hop advertises and a profit of $ million if Pop Hop does not advertise. If Pop Hop advertises, Fizzo makes a higher profit if it chooses If Pop Hop doesn't advertise, Fizzo makes a higher…Suppose that Fizzo and Pop Hop are the only two firms that sell orange soda. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Fizzo Advertise Doesn't Advertise Advertise 10, 10 2, 18 Pop Hop Doesn't Advertise For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $18 million, and Pop Hop will make a profit of $2 million. Assume this is a simultaneous game and that Fizzo and Pop Hop are both profit-maximizing firms. 18, 2 11, 11 If Fizzo decides to advertise, it will earn a profit of $ advertise. If Fizzo decides not to advertise, it will earn a profit of $ advertise. If Pop Hop advertises, Fizzo makes a higher profit if it chooses If Pop Hop doesn't advertise, Fizzo makes a higher profit if it chooses Both firms will choose to advertise. million if Pop Hop advertises and a profit of $ O Fizzo will choose to advertise and Pop Hop…
- Use the payoff matrix below to answer the next two questions. a. b. C. d. Topco does not advertise a. b. Topco advertises C. d. Acme does not advertise Both firms earn profits of $50 million. 30. Suppose Acme and Topco must choose whether or not to advertise without knowing what the other will do. In the Nash equilibrium: Topco earns profits of $60 million and Acme earns profits of $30 million. Acme advertises Topco earns profits of $30 million and Acme earns profits of $60 million Both firms earn profits of $40 million. 31. Which strategies maximize Acme's and Topco's combined profit? Neither advertises neither Acme nor Topco chooses to advertise. both Acme and Topco choose to advertise. Acme advertises, but Topco does not. Topco advertises, but Acme does not. Both advertise Acme advertises, but Topco does not Topco advertises, but Acme does not8. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Creamland Dairy King Advertises Doesn't Advertise 9,9 Doesn't Advertise 3, 15 Advertises 15, 3 11, 11 For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of $ not advertise. If Creamland decides not to advertise, it will earn a profit of $ does not advertise. million if Dairy King advertises and a profit of $ If Dairy King advertises, Creamland makes a higher profit if it chooses million if Dairy King advertises and a profit of $…To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Creamland Advertise 10, 10 18, 2 Doesn't Advertise 2, 18 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $18 million, and Dairy King will make a profit of $2 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of _________ million if Dairy King advertises and a profit of ________ million if Dairy King does not advertise. If Creamland decides not to advertise, it will earn a profit of __________ million if Dairy King advertises and a profit of _________…
- Suppose there are only two firms that sell smartphones: Flashfone and Pictech. 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 phones. Pictech Pricing High Low Flashfone Pricing High 11, 11 2, 18 Low 18, 2 10, 10 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million, and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a (HIGH OR LOW) price, and if Flashfone prices low, Pictech will make more profit if it chooses a (HIGH OR LOW) price. If Pictech prices high, Flashfone will make more profit if it chooses a (HIGH OR LOW) price, and if Pictech prices low, Flashfone will make more profit if it chooses a (HIGH OR LOW)…Suppose that Camel and Marlboro are the only two firms that sell cigarettes. The following payoff matrix shows the profit (in millions of dollars) that each company will earn depending on whether or not it advertises. For example, the upper-right cell shows that if Camel advertises and Marlboro doesn't advertise, Camel will make a profit of $10 million, and Marlboro will make a profit of -$2 million. Assume this is a simultaneous game and that Camel and Marlboro are both profit-maximizing firms. Marlboro Advertise Don't Advertise Advertise 5, 5 10, -2 Camel Don't Advertise -2, 10 8, 8 Fill in the following table by calculating Camel's profits depending on whether Marlboro advertises. Marlboro Advertise Don't Advertise Camel Advertise million million Don't Advertise million million Suppose that both firms start off not advertising. If the firms act independently, Camel will choose advertise, and Marlboro will choose advertise. If the firms decide to collude, Camel will choose advertise,…Belge1 - Word eri Gözden Geçir Görünüm Yardım Ne yapmak istediğinizi söyleyin 1) Two firms, X and Y, are planning to market their new products. Each firm can develop TV, Laptop. Market research indicates that the resulting profits to each firm for the alternative strategies are given by the following payoff matrix ! FIRM Y TV LAPTOP PHONE FIRM X TV 30, 30 60. 35 20, 50 LAPTOP 40,70 20, 20 50,80 PHONE 50,20 80,50 10,10 A) Find the Nash equilibria for this game, assuming that both firms make their decisions at the same time. (explain the decision step by step); B) If each firm is risk averse and uses a maximin strategy, what will be the resulting equilibrium? (explain the decision step by step); C) What will be the equilibrium if Firm X makes its selection first? If Firm Y goes first?:
- Suppose there are only two firms that sell smartphones: Flashfone and Pictech. 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 phones. Pictech Pricing High Low Flashfone Pricing High 11, 11 3, 15 Low 15, 3 9, 9 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $15 million, and Pictech will earn a profit of $3 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses a price. If Pictech prices high, Flashfone will make more profit if it chooses a price, and if Pictech prices low, Flashfone will make more profit if it chooses a price. Considering all of the…Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn’t Advertise Creamland Advertise 10, 10 18, 2 Doesn’t Advertise 2, 18 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $18 million, and Dairy King will make a profit of $2 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of_____million if Dairy King advertises and a profit of______million if Dairy King does not advertise. If Creamland decides not to advertise, it will earn a profit of_______million if Dairy King advertises and a profit of______million if Dairy King does not advertise. If Dairy King…Previous research suggests that many firms ‘over - invest’ in advertising - meaning spend beyond a point where advertising positively affects a firm’s bottom line (if interested see here: Advertising Effectiveness). Game Theory can explain some of this, but not all. What else can explain why many firms over invest in advertising? Are there are any reasons for firms to advertise beyond wanting to increase profits? Note: two recent Freakonomics on this topic can be found here: https://freakonomics.com/podcast/advertising-part-1 and https://freakonomics.com/podcast/advertising-part-2
