Homework (Ch 17) e Due Today at 11 PM CST Attempts: Keep the Highest:16 5. To ad

Question

Homework (Ch 17) e Due Today at 11 PM CST Attempts: Keep the Highest:16 5. To advertise or not to advertise only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises Beantown Advertise Doesnt Advertise Advertise 9,9 15,3 Expresso Doesn't Advertise 3, 15 11, 11 For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $15 million, and Beantown will make a profit of $3 million. Assume this is a simultaneous game and that Expresso and Beantown are both proft-maximizing firms. n r ant nn d e n t If Expresso decides to advertise, it will earn a profit of S advertise. million if Beantown advertises and a profit of $ million if Beantown advertises and a profit of $ million if Beantown does not advertise. Ir Beantown advertises, Expresso makes a higher profit if it chooses If Beantown doesn't advertise, Expresso makes a higher profit if it chooses

Explanation / Answer

If Expresso decides to advertise, it will earn a profit of $9 million if Beantown advertise and a profit of $15 million  if Beantown does not advertise.

If Expresso decides not to advertise, it will earn a profit of $3 million if Beantown advertise and a profit of $11 million  if Beantown does not advertise.

If Beantown advertises, Expresso makes a higher profit if it chooses Advertise.

If Beantown does not advertises, Expresso makes a higher profit if it chooses Advertise.

9, 15,3, 11, Advertise, Advertise are the answers.

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