To Draw: The pay-off matrix based on the given data.

Question

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Answer 1

Question

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

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Students have asked these similar questions

Suppose that two Japanese companies, Hitachi and Toshiba, are the sole producers (i.e., duopolists) of a microprocessor chip used in a number of different brands of personal computers. Assume that total demand for the chips is fixed and that each firm charges the same price for the chips. Each firm’s market share and profits are a function of the magnitude of the promotional campaign used to promote its version of the chip. Also assume that only two strategies are available to each firm: a limited promotional campaign (budget) and an extensive promotional campaign (budget). If the two firms engage in a limited promotional campaign, each firm will earn a quarterly profit of $14 million. If the two firms undertake an extensive promotional campaign, each firm will earn a quarterly profit of $11 million. With this strategy combination, market share and total sales will be the same as for a limited promotional campaign, but promotional costs will be higher and hence profits will be lower.…

Two firms compete by choosing price. Their demand functions are and Q₁ = 40-P₁ + P₂ Q₂=40+P₁-P21 where P₁ and P₂ are the prices charged by each firm, respectively, and Q₁ and Q₂ are the resulting demands. Note that the demand for each good depends only on the difference in prices; if the two firms colluded and set the same price, they could make that price as high as they wanted, and earn infinite profits. Marginal costs are zero. Suppose the two firms set their prices at the same time. Find the resulting Nash equilibrium. What price will each firm charge, how much will it sell, and what will its profit be? (Hint: Maximize the profit of each firm with respect to its price.) Each firm will charge a price of $ (Enter a numeric response rounded to two decimal places.) Each firm will produce units of output. In turn, each firm will earn profit of $ Suppose Firm 1 sets its price first and then Firm 2 sets its price. What price will each firm charge, how much will each sell, and what will be…

Consider a Cournot oligopoly with n = 2 firms. Firm 1 cost function is TC₁ (9₁) = 20 + 12q₁ + q², while firm 2 cost function is TC₂ (9₂) = 50 +8q2 + q2 . The total market demand is P(Q) = 50 — 2Q, where Q is the total quantity produced by all (active) firms in the industry. a- Compute the Cournot equilibrium total quantity, price, quantity for each firm, and profit for each firm. Which firm is making higher profits? b- Consider the situation in which a third firm (firm 3) enters the market. What is the total equilibrium quantity, price, quantity and profit for each firm if TC3 = TC₁? [hint: q₁ and q3 will be the same, since 1 and 3 are identical] c- How would your answer at point b change if instead TC3 = TC₂? Would consumers prefer firm 3 to enter with the total cost of firm 1 or firm 2? d- What would be the highest one-time cost that firm 3 would be willing to pay to enter the market and then compete in a Cournot game with total cost equal to firm 1?

Answer 2

Question

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

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Answer 3

Question

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

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Answer 4

Question

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

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Answer 5

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 6

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 7

Chapter 13, Problem 1E

A.

To determine

To Draw: The pay-off matrix based on the given data.

Answer 8

A.

Expert Solution

Answer to Problem 1E

The payoff matrix can be observed in the later section.

Answer 9

A.

Expert Solution

Answer 10

A.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

It is given that there are two firms in the market. And there are two given promotion kinds for the firms. Of this given data, the payoff matrix can be postulated as follows:

		Firm H
		Extensive Promotion	Low Promotion
Firm T	Extensive Promotion	$5 Million, $5 Million	$9 Million, $4 Million
Firm T	Low Promotion	$4 Million, $9 Million	$7.5 Million, $7.5 Million

Answer 13

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 14

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 15

B.

To determine

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

Answer 16

B.

Expert Solution

Answer to Problem 1E

For any given strategy of later company, the principal advertising strategy for the former company is extensive promotion.

Answer 17

B.

Expert Solution

Answer 18

B.

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

As said, it is the extensive promotion that is principal advertising strategy for the former, because the firm’s payoff is higher under extensive promotion when compared to low promotion, for a given strategy of the later.

Supposing the former’s strategy is extensive promotion, the payoff will be $5M and the latter’s strategy is extensive promotion. Similarly, the payoff will be $9M when the latter’s strategy is low promotion.

By observing the above results, it can be concluded that the minimum payoff of the former company is $5M.

Answer 21

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 22

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 23

C.

To determine

To describe: The principal advertising strategy and minimum payoff for the latter company.

Answer 24

C.

Expert Solution

Answer to Problem 1E

Since the game can be observed as being symmetric for both the companies, it can be concluded that the principal advertising strategy of extensive promotion and a minimum payoff of $5M, for both the companies.

Answer 25

C.

Expert Solution

Answer 26

C.

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

By observing the payoff matrix or the given data of the two companies, it can be said that the companies are having a symmetric game. Thus, similar to the former company, the latter is also proposed to have an extensive promotion and a minimum payoff of $5M.

Answer 29

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 30

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 31

D.

To determine

To describe: The reason firms involved may decide not to play their principal strategies.

Answer 32

D.

Expert Solution

Answer to Problem 1E

The proper explanation with the intended decisions of the firms involved in the game on the following of the given condition is given in the next section.

Answer 33

D.

Expert Solution

Answer 34

D.

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

On the condition that the game is repeated in multiple decision-making periods, the firms involved in the game may choose to signal the other firm for readying it to cooperate for making the future stream of profits higher. Hence, it can be concluded that the firms involved in the game may not prefer to play their principal strategies while this game is being repeated in multiple decision-making periods.

Answer 37

Economics Concept Introduction

Introduction: A tool that can be used to simplify and present all the possible outcomes that pop up from a strategic decision is called payoff matrix.

Answer 38

Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - Prob. 8E Ch. 13 - Prob. 9E Ch. 13 - Prob. 10E

To Draw: The pay-off matrix based on the given data.

To Draw: The pay-off matrix based on the given data.

Answer to Problem 1E

Explanation of Solution

To describe: On the given condition, propose a principal advertising strategy and minimum payoff for the former company.

Answer to Problem 1E

Explanation of Solution

To describe: The principal advertising strategy and minimum payoff for the latter company.

Answer to Problem 1E

Explanation of Solution

To describe: The reason firms involved may decide not to play their principal strategies.

Answer to Problem 1E

Explanation of Solution

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Chapter 13 Solutions