Solution-Compute the complete payoff table

Compute the complete payoff table

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Reference no: EM13832317

Firm A and Firm B are battling for market share in two separate markets. Market I is worth $30 million in revenue, market II is worth $18 million. Firm A must decide how to allocate its three salespersons between the markets; firm B has only two salespersons to allocate. Each firm's revenue share in each market is proportional to the number of salespeople the firm assigns there. For example, if Firm A puts two salespersons and Firm B puts one salesperson in market I, A's revenue from this market is [2/(2+1)]$30 = $20 million, and B's revenue is the remaining $10 million. (The firms split a market equally if neither assigns a salesperson to it). Each firm is solely interested in maximizing the total revenue it obtains from the two markets.

1. Compute the complete payoff table. (Firm A has four possible allocations: 3-0, 2-1, 1-2, and 0-3. Firm B has three allocations: 2-0, 1-1, and 0-2). Is this a constant-sum game? Explain.

2. Does either firm have a dominant strategy (or dominated strategies)? What is the predicted outcome?

	Firm B	2,0	1,1	0,2

Firm A
3,0		18,12	22.5,7.5	30,0	Market 1
2,1		15,15	20,10	30,0
1,2		10,20	15,15	30,0
0,3		0,30	0,30	0,0


	Firm B	2,0	1,1	0,2

Firm A
3,0		0,0	0,18	0,18	Market 2
2,1		18,0	9,9	6,12
1,2		18,0	12,6	9,9
0,3		18,0	13.5,	10.8,7.2

Reference no: EM13832317

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Compute the complete payoff table

Reference no: EM13832317

Reference no: EM13832317

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