Assume Vans and Converse play the following simultaneous-move advertising game. Both companies have to decide whether...

 

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Assume Vans and Converse play the following simultaneous-move advertising game. Both companies have to decide whether or not they want to advertise on Instagram. If neither company advertises on Instagram, each earns profits of $4 million. If both advertise on Instagram, each earns profits of $2 million. If one advertises and the other does not, the company that advertises earns $8 million and the company that doesn't advertise earns $0.5 million. Put Vans on the left side of the payoff matrix, with Vans profits listed 1st & Converse profits listed 2nd One-Time Game Assume Vans and Converse play the game only once. a. Draw the payoff matrix. b. Define the Nash equilibrium. Game with an Uncertain Final Period Now assume Vans and Converse play the game repeatedly, and there is an uncertain final period. Specifically, there is a one percent chance that Walmart buys both companies, which would end the game (0 = 1%). Furthermore, both agree not to advertise on Instagram...provided neither company cheats on the agreement. c. Calculate Vans profit if it cheats? d. Calculate Vans I if it cooperates? What will Vans do? Multistage Game Finally, assume Vans and Converse face a multistage game where Vans is the leader and Converse is the follower. Vans goes first and has to decide whether or not to open up a new retail store in Las Vegas. Vans has one decision to make: Open Store in Vegas or Don't Open Store in Vegas. If Vans opens a new store in Las Vegas, Converse has three decisions to make. The first option for Converse is to Open Store in Vegas, in which case Vans earns $2 million and Converse earns $2 million. The second option for Converse is to Open Store in Phoenix, where Vans earns $4 million and Converse earns $4 million. The third option for Converse is to Do Nothing, where Vans ears $8 million and Converse earns $0.5 million. If Vans doesn't open a new store in Las Vegas, Converse has two decisions to make. The first option for Converse here is to Open Store in Vegas, in which case Vans earns $0.5 million and Converse earns $8 million. The second option for Converse here is to Open Store in Phoenix, where Vans earns $0.5 million and Converse earns $10 million. e. Draw the game tree. f. Define the subgame perfect Nash equilibrium. Assume Vans and Converse play the following simultaneous-move advertising game. Both companies have to decide whether or not they want to advertise on Instagram. If neither company advertises on Instagram, each earns profits of $4 million. If both advertise on Instagram, each earns profits of $2 million. If one advertises and the other does not, the company that advertises earns $8 million and the company that doesn't advertise earns $0.5 million. Put Vans on the left side of the payoff matrix, with Vans profits listed 1st & Converse profits listed 2nd One-Time Game Assume Vans and Converse play the game only once. a. Draw the payoff matrix. b. Define the Nash equilibrium. Game with an Uncertain Final Period Now assume Vans and Converse play the game repeatedly, and there is an uncertain final period. Specifically, there is a one percent chance that Walmart buys both companies, which would end the game (0 = 1%). Furthermore, both agree not to advertise on Instagram...provided neither company cheats on the agreement. c. Calculate Vans profit if it cheats? d. Calculate Vans I if it cooperates? What will Vans do? Multistage Game Finally, assume Vans and Converse face a multistage game where Vans is the leader and Converse is the follower. Vans goes first and has to decide whether or not to open up a new retail store in Las Vegas. Vans has one decision to make: Open Store in Vegas or Don't Open Store in Vegas. If Vans opens a new store in Las Vegas, Converse has three decisions to make. The first option for Converse is to Open Store in Vegas, in which case Vans earns $2 million and Converse earns $2 million. The second option for Converse is to Open Store in Phoenix, where Vans earns $4 million and Converse earns $4 million. The third option for Converse is to Do Nothing, where Vans ears $8 million and Converse earns $0.5 million. If Vans doesn't open a new store in Las Vegas, Converse has two decisions to make. The first option for Converse here is to Open Store in Vegas, in which case Vans earns $0.5 million and Converse earns $8 million. The second option for Converse here is to Open Store in Phoenix, where Vans earns $0.5 million and Converse earns $10 million. e. Draw the game tree. f. Define the subgame perfect Nash equilibrium.

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Answer a The payoff matrix Converse Advertise No ad Adve... View the full answer