Suppose that Camel and Marlboro are the only two firms that sell cigarettes. The following payoff matrix shows the profit (in millions of dollars) thateach company will earn depending on whether or not it advertises.For example, the upper-right cell shows that if Camel advertises and Marlboro doesn't advertise, Camel will make a profit of $10 million, and Marlborowill make a profit of -$2 million. Assume this is a simultaneous game and that Camel and Marlboro are both profit-maximizing firms.MarlboroAdvertise Don't AdvertiseAdvertise5, 510, -2CamelDon't Advertise-2, 108, 8Fill in the following table by calculating Camel's profits depending on whether Marlboro advertises.MarlboroAdvertiseDon't AdvertiseCamelAdvertisemillionmillionDon't AdvertisemillionmillionSuppose that both firms start off not advertising. If the firms act independently, Camel will chooseadvertise, and Marlboro will chooseadvertise. If the firms decide to collude, Camel will chooseadvertise, and Marlboro will chooseadvertise.Suppose that the government steps in and bans cigarette advertising for all firms. This willthe firms.

There are two firms, i.e., Camel and Malboro which sell cigarettes. If camel advertise and Marlboro does not, then camel will make a profit of $10 million and Marlboro will make a profit of -$2 million ------------------- Camel's profit depending on Malboro's decision. If Malboro advertises, and Camel advertises too. Then camel will make a profit of $5 million If Malboro advertises, and Camel doesn't advertise. Then Camel will make a profit of -$2 million. If Malboro doesn't advertise, and Camel advertises. Then Camel will make a profit of $10 million If Malboro doesn't advertise, and Camel doesn't advertise too. Then Camel will make a profit of $8 million Malboro Camel Advertises Doesn't advertises Advertises $5 million $10 million Doesn't advertises $2 million $8 million 'Suppose that both firms start off not advertising. If the firm acts independently. Camel will choose to advertise (in order to make more profit) and Malboro will choose to advertise (in order to make more profit) If both firms collude, the camel will choose not to advertise and Malboro will choose not to advertise (in order to make joint profit bigger) Suppose that the government steps in and bans cigarette advertising for all firms, This will benefit the firms.

Business

Economics

Suppose that Camel and Marlboro are the only two firms that sell cigarettes. The following payoff matrix shows the profit (in millions of dollars) that each company will earn depending on whether or not it advertises. For example, the upper-right cell shows that if Camel advertises and Marlboro doesn't advertise, Camel will make a profit of $10 million, and Marlboro will make a profit of -$2 million. Assume this is a simultaneous game and that Camel and Marlboro are both profit-maximizing firms. Marlboro Advertise Don't Advertise Advertise 5,5 10, -2 Camel Don't Advertise 2, 10 8, 8

Suppose that Camel and Marlboro are the only two firms that sell cigarettes. The following payoff matrix shows the profit (in millions of dollars) that each company will earn depending on whether or not it advertises. For example, the upper-right cell shows that if Camel advertises and Marlboro doesn't advertise, Camel will make a profit of $10 million, and Marlboro will make a profit of -$2 million. Assume this is a simultaneous game and that Camel and Marlboro are both profit-maximizing firms. Marlboro Advertise Don't Advertise Advertise 5,5 10, -2 Camel Don't Advertise 2, 10 8, 8

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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