4. (30 Marks) Consider a game in which two firms choose eitherfull scale (F) or niche (N)...
Question:
4. (30 Marks) Consider a game in which two firms choose eitherfull scale (F) or niche (N) advertising campaigns. The payoffs fromthe possible strategy combinations are as follows:
Where x represents costs specific to firm 2 for undertaking afull scale advertising campaign.
A) Suppose the cost of the full campaign to firm 2 is x=250.Find the Pure Strategy Nash Equilibrium to the game. (10 marks)
B) For what values of x is niche a dominant strategy for firm 2?(10 marks)
C) For any value of x you found in B), determine the PureStrategy Nash Equilibrium. Is the equilibrium unique? Why or whynot? (5 marks)
D) In general, if firm 1 could increase firm 2?s full scaleadvertising costs (x) would it have an incentive to do so? Why orwhy not? (5 marks)
An introduction to management science quantitative approaches to decision making
ISBN: 978-1111532222
13th edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam