Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 15, Problem 14APA
To determine
Identify the benefits from each action led by the Coca-Cola and PepsiCo in advertising game and construct a game to show the choices of both the firms.
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Anna, Bill, and Charles are competitors in a local market, and each is trying to decide whether it is worthwhile to advertise, If all of
them advertise, each will earn a profit of $5000. If none of them advertise, each will earn a profit of $8000, If only one of them
advertises, the one who advertises will earn a profit of $10,000 and the other two will each earn $2000. If two of them advertise,
those two will each earn a profit of $6000 and the other one will earn $1000. If all three follow their dominant strategy, what will
Anna do, and how much will she earn?
Select one:
a. Anna will advertise and earn $5000.
b. Anna will advertise and earn $6000.
C. Anna will not advertise and will earn $8000,
d. Anna will advertise and earn $10,000.
"Set up the oligopoly method and explain the strategies and you reach the nash equilibrium? "
Previous research suggests that many firms ‘over - invest’ in advertising - meaning spend beyond a point where advertising positively affects a firm’s bottom line (if interested see here: Advertising Effectiveness). Game Theory can explain some of this, but not all. What else can explain why many firms over invest in advertising? Are there are any reasons for firms to advertise beyond wanting to increase profits? Note: two recent
Freakonomics on this topic can be found here: https://freakonomics.com/podcast/advertising-part-1 and https://freakonomics.com/podcast/advertising-part-2
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1RQCh. 15.1 - Prob. 2RQCh. 15.1 - Prob. 3RQCh. 15.1 - Prob. 4RQCh. 15.2 - Prob. 1RQCh. 15.2 - Prob. 2RQCh. 15.2 - Prob. 3RQCh. 15.2 - Prob. 4RQCh. 15.2 - Prob. 5RQCh. 15.2 - Prob. 6RQ
Ch. 15.3 - Prob. 1RQCh. 15.3 - Prob. 2RQCh. 15.4 - Prob. 1RQCh. 15.4 - Prob. 2RQCh. 15.4 - Prob. 3RQCh. 15.4 - Prob. 4RQCh. 15.4 - Prob. 5RQCh. 15 - Prob. 1SPACh. 15 - Prob. 2SPACh. 15 - Prob. 3SPACh. 15 - Prob. 4SPACh. 15 - Prob. 5SPACh. 15 - Prob. 6SPACh. 15 - Prob. 7SPACh. 15 - Prob. 8SPACh. 15 - Prob. 9APACh. 15 - Prob. 10APACh. 15 - Prob. 11APACh. 15 - Prob. 12APACh. 15 - Prob. 13APACh. 15 - Prob. 14APACh. 15 - Prob. 15APACh. 15 - Prob. 16APACh. 15 - Prob. 17APACh. 15 - Prob. 18APACh. 15 - Prob. 19APACh. 15 - Prob. 20APACh. 15 - Prob. 21APACh. 15 - Prob. 22APACh. 15 - Prob. 23APA
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