The profit that each firms expects to make will depend on the choices made by all three. All have access to the same market research data, and estimates (in $millon ) shown below. Keep in mind that each firm has different cost, since their profits are not identical, but each firm knows the profit expectations of the others for every possible combination. Each adopts a game theoretic approach to the problem of deciding which model it should produce. What does each firm produce considering the data provided below?

 

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If B produces If C produces If A produces If A produces If C produces If B produces E M If A produces If B produces L If C produces E M L E M L E M 15 26 E 13 23 21 26 24 E E 23 18 23 17 E M 17 18 26 E 24 27 M 24 26 L 20 Firm A's expected profit 16 L 19 23 17 16 19 22 24 17 L 29 28 E M L Firm B's expected profit 25 21 20 18 18 22 23 20 23 E M 25 18 21 18 17 E 26 M 24 M 25 23 M M 31 L Firm C's expected profit 28 E 21 L 32 28 27 L 15 18 M L 16 E M 22 20 22 24 19 24 19 24 E 19 23 L 27 21 L 25 28 33 19 L 23 M L 25 24 19 29 30 35 20 If B produces If C produces If A produces If A produces If C produces If B produces E M If A produces If B produces L If C produces E M L E M L E M 15 26 E 13 23 21 26 24 E E 23 18 23 17 E M 17 18 26 E 24 27 M 24 26 L 20 Firm A's expected profit 16 L 19 23 17 16 19 22 24 17 L 29 28 E M L Firm B's expected profit 25 21 20 18 18 22 23 20 23 E M 25 18 21 18 17 E 26 M 24 M 25 23 M M 31 L Firm C's expected profit 28 E 21 L 32 28 27 L 15 18 M L 16 E M 22 20 22 24 19 24 19 24 E 19 23 L 27 21 L 25 28 33 19 L 23 M L 25 24 19 29 30 35 20

Answer rating: 100% (QA)

All three companies estimated profits from their potential decisions need to be analysed to find out ... View the full answer