1. Suppose two soda brands, Mountain Dew and Mello Yello, are trying to decide w

Question

1. Suppose two soda brands, Mountain Dew and Mello Yello, are trying to decide whether to launch advertising campaigns for their respective products. These decisions will be taken simultaneously, the brands will not be cooperating, and we will assume each brand's strategist knows her own and her opponent's payoffs in all cases. The payoff matrix for this game is shown below.

Refer to the scenario above. If both brands choose to advertise, their respective payoffs are:
a. profits of 10 cents per can for Mountain Dew and of 5 cents per can for Mello Yello
b. profits of 15 cents per can for Mountain Dew and of 0 cents per can for Mello Yello
c. profits of 6 cents per can for Mountain Dew and of 8 cents per can for Mello Yello
d. profits of 10 cents per can for Mountain Dew and of 2 cents per can for Mello Yello

2. Refer to the scenario above. Does Mountain Dew have a dominant strategy?
a. Not enough information is provided to answer the question.
b. No.
c. Yes. Regardless of whether Mello Yello chooses to advertise, Mountain Dew's profits are always highest if it advertises.
d. Yes. Regardless of whether Mello Yello chooses to advertise, Mountain Dew's profits are always highest if it does not advertise.

3 .Refer to the scenario above. Is there a dominant strategy equilibrium?
a. Yes: Mountain Dew advertises, Mello Yello advertises
b. Yes: Mountain Dew does not advertise, Mello Yello does not advertise
c. No
d. Yes: Mountain Dew advertises, Mello Yello does not advertise

Advertising Game: Mountain Dew -Mello Yello Structure of Payoffs Profit numbers are cents per can) (MD profits per can, MY Mello-Yello Don't Advertise 15, 0 10, 2 Advertise profits per can) |Advertise10, Mountairn Dew Don't Advertise 5 6 8

Explanation / Answer

1.)

If both players go with strategy Advertise, then profit of 10 cents per can for mountain Dew and of 5 cents per can for Mello Yello.

Right answer is (A)

2)

Advertise is dominant strategy for Mountain Dew. (10, 15) > (6,10)

Right answer is : ( C )

3)

Advertise is dominant strategy for Mello Yello as well. Hence, equilibrium is ( Advertise, Advertise )

Right answer is (A)

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.