× MnTap . Cengage les 4885003236227506 (- \' C | Not secure l ng.cengage corn/st
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× MnTap . Cengage les 4885003236227506 (- ' C | Not secure l ng.cengage corn/static/relu, indechtmineldismantNdedizioaso MNDTAP plia Homework: Monopolistic Competition, Oligopoly, and Game Theory e Oue Today at 11.59 PM CST 14. To advertise or not to advertise Pop Hop are the only two firms that sel orange soda·The following payoff matrix shows the profit (in millions of dollars) Suppose that Fizzo and company will earn depending on whether or not it advertises: Pop Hop Advertse Doesn't Advertse 15,2 Advertise Doesn1 Advertise 2,15 Fizzo 9, 9 For example, the upper right cell shows that if Fizzo advertises and Pop Hop doesn't advertise, Fizzo will make a profit of $15 million, and Pop Hop make a proft of $2 million. Assume this is a simultaneous game and that Fizzo and Pop Hop are both profit-manimizing firms nEo"Pep Hop advertises and a profit of million if Pop Hop does not f Fizzo decides to advertise, it will earn a profit of advertise. Fizzo decides not to advertise, it earn a proft of$ advertise million if Pop Hop does not if Poo Ho adertises, Fizze makes a higher profit if it chooses t Pop Hop doesn't advertise, Fizzo makes a higher profit f it chooses Supposre that both frms start off not satiaing, Il the Sims act independenty, what strategies wit they end up choosing? If the firms act independently, what strategies wil they end up choosing? Both firms will choose to advertise. Fizzo will choose to advertise and Pop Hop wil choose not to advertise Fino choose not to advertise and Pop Hop wil choose to advertise Both frms will choose not to advertise.Explanation / Answer
a) $ 8 million
b) $ 15 million
c) $ 2 million
d) $ 9 million
e) Advertise because advertise gives him profit of $ 8 million while does not advertise give him only 2 million
f) Advertise because advertise gives him profit of $ 15 million while does not advertise give him only 9 million
g) Both firms will choose advertising.
This is because each think that other firm will not change its decision. So, both end up with advertisement.
h) Both firms will choose not to advertise.
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