The following is a payoff matrix showing profit in millions of dollars when two companies simultaneously decide on various advertising budgets ($1 million, $2 million, or $3 million): Pizza Hut $1 mill $2 mill $3 mill $1 mill $120 / $175 110 / 160 100 / 170 Papa Johns $2 mill 130 / 150 115 / 145 110 / 155 $3 mill 140 / 125 120 / 120 105 / 130 a. In the first round of strategy elimination (when all three possible budgets are under consideration), which ad budget would the companies exclude? b. After the first round of elimination (previous question), would either company make a second-round elimination? c. What would be the likely outcome of this simultaneous advertising decision (i.e. what ad budget would each company end up choosing)?
The following is a payoff matrix showing profit in millions of dollars when two companies simultaneously decide on various advertising budgets ($1 million, $2 million, or $3 million): Pizza Hut $1 mill $2 mill $3 mill $1 mill $120 / $175 110 / 160 100 / 170 Papa Johns $2 mill 130 / 150 115 / 145 110 / 155 $3 mill 140 / 125 120 / 120 105 / 130 a. In the first round of strategy elimination (when all three possible budgets are under consideration), which ad budget would the companies exclude? b. After the first round of elimination (previous question), would either company make a second-round elimination? c. What would be the likely outcome of this simultaneous advertising decision (i.e. what ad budget would each company end up choosing)?
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
Section: Chapter Questions
Problem 5MC
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The following is a payoff matrix showing profit in millions of dollars when two companies simultaneously decide on various advertising budgets ($1 million, $2 million, or $3 million):
Pizza Hut
$1 mill $2 mill $3 mill
$1 mill $120 / $175 110 / 160 100 / 170
Papa Johns $2 mill 130 / 150 115 / 145 110 / 155
$3 mill 140 / 125 120 / 120 105 / 130
a. In the first round of strategy elimination (when all three possible budgets are under consideration), which ad budget would the companies exclude?
b. After the first round of elimination (previous question), would either company make a second-round elimination?
c. What would be the likely outcome of this simultaneous advertising decision (i.e. what ad budget would each company end up choosing)?
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