Suppose two firms, Genera Pharma and Futura Pharma, are the only two producers of aspecific drug. Genera and Futura have the same formula and sell the drug for the sameprice, but they are considering whether or not to spend money on an advertisingcampaign. Each firm can either buy the advertising campaign or not buy it and thefollowing table shows profits for four different scenarios.FuturaADNo ADAD(4,4)(12,0)GeneraNo AD(0,12)(8,8)1. What is the scenario that maximizes the sum of profits of the two companies?2. Is there a dominant strategy for each firm?3. What is the pure strategy Nash Equilibrium?Find4. Denote the probability of choosing AD for Futura as f and for Genera as 9.the best response function for Futura, bƒ (g), and Genera, bg (ƒ).

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uppose two firms, Genera Pharma and Futura Pharma, are the only two producers of a pecific drug. Genera and Futura have the same formula and sell the drug for the same rice, but they are considering whether or not to spend money on an advertising ampaign. Each firm can either buy the advertising campaign or not buy it and the ollowing table shows profits for four different scenarios.

uppose two firms, Genera Pharma and Futura Pharma, are the only two producers of a pecific drug. Genera and Futura have the same formula and sell the drug for the same rice, but they are considering whether or not to spend money on an advertising ampaign. Each firm can either buy the advertising campaign or not buy it and the ollowing table shows profits for four different scenarios.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 3E

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