7) The following payoff matrix shows the annual profits of Target and Costco if they choose different combinations of advertising strategies. The payoff ofCostco is listed first, and the profit of Target second. Use the given payoff matrix to answer questions 8 to 12.TABLE 24CostcoOSpend $1B onadvertisingOOSpend $1.5B onadvertisingSpend $1B on advertising$3.5B; $2.7BDoes Costco have a dominant strategy? If yes, what is it?$4.2; $2.2BCostco does not have a dominant strategy.Yes,the dominant strategy is to spend $1B on advertising.Yes, the dominant strategy is to spend $1.5B on advertising.It cannot be determined.TargetSpend $1.5B on advertising$3.2B; $3.4B$4B; $3B

Dominant strategy is the strategy that will not the the decision when the other player changes its…

The following payoff matrix shows the annual profits of Target and Costco if they choose different combinations of advertising strategies. The payoff of Costco is listed first, and the profit of Target second. Use the given payoff matrix to answer questions 8 to 12. TABLE 24 Costco Spend $1B on advertising Spend $1.5B on advertising Spend $1B on advertising $3.5B; $2.7B $4.2; $2.2B Does Costco have a dominant strategy? If yes, what is it? Costco does not have a dominant strategy. OYes, the dominant strategy is to spend $1B on advertising. Yes, the dominant strategy is to spend $1.5B on advertising. O It cannot be determined. Target Spend $1.5B on advertising $3.2B; $3.4B $4B; $3B

The following payoff matrix shows the annual profits of Target and Costco if they choose different combinations of advertising strategies. The payoff of Costco is listed first, and the profit of Target second. Use the given payoff matrix to answer questions 8 to 12. TABLE 24 Costco Spend $1B on advertising Spend $1.5B on advertising Spend $1B on advertising $3.5B; $2.7B $4.2; $2.2B Does Costco have a dominant strategy? If yes, what is it? Costco does not have a dominant strategy. OYes, the dominant strategy is to spend $1B on advertising. Yes, the dominant strategy is to spend $1.5B on advertising. O It cannot be determined. Target Spend $1.5B on advertising $3.2B; $3.4B $4B; $3B

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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5. 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: Hatte Latte Advertise Doesn't Advertise Advertise 10, 10 Bean Bruuer 2,18 Doesn't Advertise 18, 2 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 $18 million, and Hatte Latte will make a profit of $2 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. If Hatte Latte chooses not to advertise, it will earn a profit of $ Bruuer does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a…
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. O When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. Read the following example and determine whether it illustrates a common critique or defense of advertising. Sean sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. defense critique This illustrates a common of advertising.
Problem 10-03 (algo) Use the following payoff matrix for a simultaneous-move one-shot game to answer the accompanying questions. с 9, 8 23, 13 a. What is player 1's optimal strategy? Strategy A B Player 1 O Strategy A O Player 1 does not have an optimal strategy. O Strategy B b. Determine player 1's equilibrium payoff. Player 2 D 14, 14 10, 18 E 18, 25 14, 26 F 12, 19 19, 21
N: $30 V: $130 High price New firm N: $50 V: $100 Low price Advertise Verizon N: $60 V: $140 Do not advertise Expand High price New New firm firm Low price N: $70 V: $90 Do not N: $30 V: $170 The figure shown displays the choices that could be made by Verizon and a new firm in the industry. The payoffs are the profits (in millions) these companies will earn as a result of their choices. What will be the outcome of this game? Multiple Choice The new firm will expand; Verizon will advertise; the new firm will choose high prices. The new firm will expand; Verizon will advertise; the new firm will choose low prices. The new firm will expand; Verizon will not advertise; the new firm will choose high prices. The new firm will not expand. еxpand
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. Read the following example and determine whether it illustrates a common critique or defense of advertising. Raphael sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising.
(a) Suppose Fiat recently entered into an Agreement and Plan of Merger with Case for $4.3 billion. Prior to the merger, the market for four-wheel-drive tractors consisted of five firms. The market was highly concentrated, with a Herfindahl- Hirschman index of 2,765. Case's share of that market was 22 percent, while Fiat comprised just 12 percent of the market. If approved, by how much would the postmerger Herfindahl-Hirschman index increase?
Figure B Boeing (B) High Price A: $50 B: - $10 Low Price Low A: $5 Price Airbus (A) High Price B: $4 A: - $10 B: $40 A: $40 B: $30 [MUST SHOW ROUGH WORK] Figure B shows the payoffs in terms of economic profits for Airbus and Boeing in billions of dollars. Each company has two strategies: (1) charge a low price or (2) charge a high price. In a Nash equilibrium, what are the economic profits of Boeing? Select one: A. - $10 billion O B. $40 billion C. $4 billion D. $5 billion O E. $30 billion
7. Game theory Consider a simultaneous move game with two players. Player 1 has three possible actions (A, B, or C) and Player 2 has two possible actions (D or E.) In the payoff matrix below, each cell contains the payoff for Player I followed by the payoff for Player 2. Player 2 Player 1 A B C D -3, -3 0, -11 -4, 3 -11, E 0 -7, -7 -12, 0 (a) Identify any dominated strategies in this game. If there are none, state this clearly. (b) Identify any pure strategy Nash Equilibria in this game. If there are none, state this clearly.
11. Game theory terminology Complete the following table by selecting the term best described by each definition. A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again The event that occurs when agents in a game form an agreement about which strategies to implement Tit-for- Definition Payoff Matrix Dominant Strategy Nash tat Prisoners' Dilemma Equilibrium Strategy Game Collusion A player's best choice, if it exists, regardless of their opponent's strategy O O O O O O O O O O
7. High-tech Industry Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget: Synergy's Decision Large Budget Small Budget Large Budget $20 million, $25 million $15 million, $0 Dynaco's Decision Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a ▼ budget. Therefore, Synergy a dominant strategy. If Dynaco believes Synergy will go with a large budget, it will choose a budget. If Dynaco believes Synergy will go with a small budget, it will choose a budget. Therefore, Dynaco a dominant strategy. True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.) O True O False
7 Consider a supply chain with the manufacturer, the retailer and end-users, using a buy-back contract, as below cost-benefit & demand forecasting details: F=$120,000 ; c=$30 ; w=$75 ; b=$50 ; p=$122 ; s=$15; Demand 1,800 1,920 2,040 2,160 Probability 26% 27% 29% 18% Calculate the retailer’s marginal profit, retailer’s marginal loss, manufacturer’s marginal profit. Calculate the expected profit of the retailer and the manufacturer for 4 above-mentioned demand scenarios. Then, conclude on which production quantity Q to maximize manufacturer’s expected profit, which production quantity Q to maximize retailer’s expected profit.
Time left 0:00:55 Figure B Boeing (B) High Price A: $50 B: - $10 Low Price A: $5 B: $4 Low Price Airbus (A) High Price A: - $10 A: $40 B: $30 B: $40 [MUST SHOW ROUGH WORK] Figure B shows the payoffs in terms of economic profits for Airbus and Boeing in billions of dollars. Each company has two strategies: (1) charge a low price, or (2) charge a high price. In a Nash equilibrium, what are the economic profits of Boeing? Select one: A. - $10 billion B. $40 billion O C. $4 billion OD $5 billion E. $30 billion