n game theory, a "payoff matrix" is a table that shows the following, except Multiple Choice the profits to each firm or player that would result from various strategy combinations. the target payoffs that each firm or player is aiming for in their different strategies. the interdependence of the firms’ or players’ profits, based on their alternative actions. the alternative results that the firms or players would get, based on their actions and those of others.

a. b. Each firm has four alternative strategies, and a certain profit/payoff is associated with each strategy. The numbers in the payoff matrix denote firm A's profit (in thousands of dollars). The total amount of profit that can be earned by the two firms together is $20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000 minus firm A's profit. What strategies will the two firms select? Is the game strictly determined? If so, how much does each firm gain? B's strategies A's strategies ↓ Increase Advertising Decrease Price Increase Price Alter Product Increase Advertising 0 11 8 11 Decrease Price 8 10 6 2 Increase Price 7 12 15 Alter Product 4 15 3 12 Suppose now that due to a change in consumer preferences, firm A's "Increase Price" strategy pays off better than before when firm B elects to "Decrease Price," that is, the payoff rises from 6 to 14. What strategies will the two firms now select? Is the game strictly determined? If so, how much does each firm…

Two rival companies competing in the same market need to decide their plans for future expansion of their stores. The Table below shows the possible outcomes of their mutually interdependent actions (payoffs are profits in £m)     Giga Company Titanic Conglomerate   No Change Refurbishment of existing stores Large Expansion No Change     30, 40      25, 35    15, 24 Refurbishment of existing stores     35, 30      28, 32    18, 33 Large Expansion     12, 22     18, 20    20, 25   The Nash equilibrium:            (A)       does not exist. (B)       occurs when both firms choose Refurbishment of existing stores.              (C)       occurs when both firms choose Large Expansion. (D)       occurs when both firms choose No Change.

Two discount stores (Megastore and Superstore) are interested in expanding their market share through advertising. The table below depicts the strategic outcomes (profits) of both stores with and without advertising. Superstore - Advertise Superstore - Don't Advertise Megastore - Advertise $95, $80 $305, $55 Megastore - Don't Advertise $65, $285 $165, $115 When the game does reach Nash Equilibrium, the payoffs for both stores will be a) Megastore $95 and Superstore $80 b) Megastore $305 and Superstore $55 c) Megastore $65 and Superstore $285 d) Megastore $165 and Superstore $115