Firms will choose to advertise

Reference no: EM13774673

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:
Beantown
Advertise Doesn't Advertise
Expresso Advertise 6, 6 14, 4
Doesn't Advertise 4, 14 10, 10
For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $14 million, and Beantown will make a profit of $4 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms.
If Expresso decides to advertise, it will earn a profit ofmillion if Beantown advertises and a profit ofmillion if Beantown does not advertise.
If Expresso decides not to advertise, it will earn a profit ofmillion if Beantown advertises and a profit ofmillion if Beantown does not advertise.
If Beantown advertises, Expresso makes a higher profit if it chooses .
If Beantown doesn't advertise, Expresso makes a higher profit if it chooses .
Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing?

Expresso will choose to advertise and Beantown will choose not to advertise.
Both firms will choose not to advertise.
Expresso will choose not to advertise and Beantown will choose to advertise.
Both firms will choose to advertise.
Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing?

Both firms will choose to advertise.
Expresso will choose not to advertise and Beantown will choose to advertise.
Both firms will choose not to advertise.
Expresso will choose to advertise and Beantown will choose not to advertise.

Reference no: EM13774673

Questions Cloud

What chemical reaction is involved here : What is the most likely reason DOT regulates the domestic transportation of charcoal in this fashion? What chemical reaction is involved here?

Successful environmental auditing program : The Fourth Amendment to the Constitution protects which of the following principles?

What is required in order to have an enforceable contract : What is required in order to have an enforceable contract? Does it have to be written

Asses the view that functionalist decline social change : Asses the view that functionalist decline social change.

Firms will choose 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:

Recognizing business opportunities : Locate and summarize a University Library article related to recognizing business opportunities. Prepare a 350- to 700-word summary of your article with respect to determining opportunities to starting a small business.

How you would build global awareness and understanding : Discuss in 750-1,000-words how you would build global awareness and understanding and integrate diverse social and cultural perspectives to create novel approaches to solving problems.

The health information profession and him staff : ?How does an HIM manager go about applying these to processes within the HIM department?

Security domains of a typical it infrastructure : Analyze the seven security domains of a typical IT infrastructure and determine which two of the seven you would implement first for a nationwide bank. Explain your rationale for your choice.

User Account

All Pages