Economics (7th Edition) (What's New in Economics)
Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 14, Problem 14.2.12PA
To determine

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We will loosely model the petrol crisis the UK has recently experienced as a game. Start with a two-player case. Assume that there are two people living on an island and each person has two actions: keep buying petrol as normal or rush to the petrol station and fill up the tank. When both players buy as normal, the petrol supply would be enough for the two, and hence no single player has any incentives to rush. In fact, when all players keep buying as normal, rushing unilaterally will incur a small cost (e.g. one has to give up their normal routine, go to the gas station with half full tanks etc.). If one player rushes, however, the other has incentives to do so too, for waiting when the other player rushes results in the worst outcome for the player who waits. Create a game using this scenario assuming that players decide simultaneously. Assign payoffs for all possible strategy combinations, carefully arguing and justifying why you assigned a particular payoff to a particular strategy…
Suppose that two corporations, Analytica and Bobmetrics, are negotiating the share of profit from a time sensitive joint project. The total profit generated by the project is £10 million. However, every day that the deal is delayed reduces the value of the total profit by £1 million. The way the negotiation is set up is the following: in the first day, Analytica’s lawyers propose a split of the profits, and Bobmetrics’ lawyers can agree, or they can discuss it some more and make their own offer on the second day. After that the two teams alternate. Analytica gets to make proposals on days 1, 3, 5, 7, and 9, while Bobmetrics makes proposals on days 2, 4, 6, 8 an 10. On day 11, the profit from the joint project becomes 0. The negotiations stop when either company accepts the proposal of the other, or on day 11. Find the subgame perfect Nash equilibria of this dynamic negotiation game. What happens when the loss of value is slower or faster? What conclusions can you draw? Briefly explain…
Mercedes Benz seem to win every time with their social media campaigns.  The one that stands out to me was back in 2013 when they created what I still believe to be one of the best Instagram marketing campaigns to date. Mercedes wanted to reach out to the younger audience so they hired five top Instagram photographers to each take the wheel of a new Mercedes CLA. Whoever got the most likes got to keep the car – so they all really worked at it! By the end of the campaign, Mercedes has received: 87,000,000 organic Instagram impressions 2,000,000 Instagram likes 150 new marketing assets (stunning photos) Q1. What lessons can you learn from this? Could you put your followers up for a challenge and make it into a competition or campaign? Q2. Can you do a competition that gets people trying out your product first? Q3. Think about your target audience. What is a prize they would value? Q4. Like Mercedes you could recruit bloggers/influencers via social media and get them blogging about your…
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