If the firms act independently what strategies will they end up choosing?

Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff mat Show more Suppose that Expresso and Beantown are the 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 Beantown Advertise Doesnt Advertise Expresso Advertise 10 10 18 2 Expresso Doesnt Advertise 2 18 11 11 For example the upper right cell shows that if Expresso advertises and Beantown doesnt advertise Expresso will make a profit of $18 million and Beantown will make a profit of $2 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms. If Expresso decides to advertise it will earn a profit of million if Beantown advertises and a profit of million if Beantown does not advertise. Points: Close Explanation Explanation: If Expresso decides not to advertise it will earn a profit of million if Beantown advertises and a profit of million if Beantown does not advertise. Points: Close Explanation Explanation: If Beantown advertises Expresso makes a higher profit if it chooses selector 1 {C} not to advertise to advertise . Points: Close Explanation Explanation: If Beantown doesnt advertise Expresso makes a higher profit if it chooses selector 1 not to advertise to advertise . Points: Close Explanation Explanation: Suppose that both firms start off not advertising. If the firms act independently what strategies will they end up choosing? Expresso will choose to advertise and Beantown will choose not to advertise. Both firms will choose not to advertise. Expresso will choose not to advertise and Beantown will choose to advertise. Both firms will choose to advertise. Points: Close Explanation Explanation: Again suppose that both firms start off not advertising. If the firms decide to collude what strategies will they end up choosing? Expresso will choose not to advertise and Beantown will choose to advertise. Both firms will choose not to advertise. Expresso will choose to advertise and Beantown will choose not to advertise. Both firms will choose to advertise. Show less

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