PLEASE HELP ANSWER ALL THREE HOMEWORK QUESTIONS AND EXPLAIN...:..... REPEAT ALL

Question

PLEASE HELP ANSWER ALL THREE HOMEWORK QUESTIONS AND EXPLAIN...:.....REPEAT ALL THREE QUESTIONS....

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):

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QUESTION ONE: In the first round of strategy elimination (when all three possible budgets are under consideration), which ad budget would the companies exclude?

Select one:

a. Papa Johns would eliminate $2 mill; Pizza Hut would eliminate $1 mill.

b. Papa Johns would eliminate $3 mill; Pizza Hut would eliminate $1 mill.

c. Papa Johns would eliminate $1 mill; Pizza Hut would eliminate $2 mill.

d. Papa Johns would eliminate $2 mill; Pizza Hut would eliminate $2 mill.

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QUESTION TWO: After the first round of elimination (previous question), would either company make a second-round elimination?

Select one:

a. Both companies eliminate $2 mill in the second round.

b. Papa Johns wouldn't eliminate either; Pizza Hut would eliminate $2 mill.

c. Neither company would eliminate in the second round.

d. Papa Johns would eliminate $1 mill; Pizza Hut wouldn't eliminate either.

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QUESTION THREE: What would be the likely outcome of this simultaneous advertising decision (i.e. what ad budget would each company end up choosing)?

Select one:

a. Papa Johns would choose $1 mill; Pizza Hut would choose $2 mill.

b. Both would choose $3 mill.

c. Papa Johns would choose $3 mill; Pizza Hut would choose $1 mill.

d. Both would choose $2 mill.

Pizza Hut Pizza Hut Pizza Hut $1 mill $2 mill $3 mill Papa Johns $1 mill $60/$55 $70/60 $20/65 Papa Johns $2 mill $80/40 $40/55 $60/50 Papa Johns $3 mill $85/35 $67/45 $65/55

Explanation / Answer

1. a. Papa Johns would eliminate $2 mill; Pizza Hut would eliminate $1 mill.

Pizza Hut eliminates $ 1 mill because payoff in $ 1 is less than the payoff under $ 2 mill in all scenario. After this step, we get to know that answer would be either A or B so, now compare the payoff of Papa Johns in $ 2 mill and $ 3 mill. After comparing, we get that payoff in $ 2 mill is lower than $ 3 mill in every situation. So, Papa John will eliminate $ 2 mill.

2. b. Papa Johns wouldn't eliminate either; Pizza Hut would eliminate $2 mill.

After first round of elimination we are left with:

Pizza Hut gets more payoff in choosing $ 3 mill so it can eliminate $ 2 mill while on the other hand, Papa Johns get more in one situation and less on the other. So, Papa Johns cannot eliminate.

3. b. Both would choose $3 mill.

After second round of elimination, we are left with:

From the above 2 combination of payoff, Pizza Hut will definately choose $ 3 mill so best response of Papa Johns is $ 3 mill.

Pizza Hut Pizza Hut $2 mill $3 mill Papa Johns $1 mill $70/60 $20/65 Papa Johns $3 mill $67/45 $65/55

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