Ford Motor Co. and General Motors must decide whether or not to offer rebates to purchasers...

 

Transcribed Image Text:

Ford Motor Co. and General Motors must decide whether or not to offer rebates to purchasers of the Ford Fusion and Chevrolet Malibu, respectively. The payoff matrix above represents the weekly profit ($1,000s) available to the firms under the different rebate strategies. a. What is the dominant strategy for Ford? b. What is the dominant strategy for Chevy? c. Which quadrant represents the equilibrium that will result if both firms act independently and compete with one another? What is the name of this equilibrium? d. Which quadrant represents the equilibrium that will result if the two firms successfully collude? If the two firms collude, what is Ford's incentive to cheat on the collusive agreement? Rebate Chevy's Strategies No Rebate $95 Rebate -$120 Ford's Strategies $100 $300 HII No Rebate $300 $250 -$200 $250 IV Ford Motor Co. and General Motors must decide whether or not to offer rebates to purchasers of the Ford Fusion and Chevrolet Malibu, respectively. The payoff matrix above represents the weekly profit ($1,000s) available to the firms under the different rebate strategies. a. What is the dominant strategy for Ford? b. What is the dominant strategy for Chevy? c. Which quadrant represents the equilibrium that will result if both firms act independently and compete with one another? What is the name of this equilibrium? d. Which quadrant represents the equilibrium that will result if the two firms successfully collude? If the two firms collude, what is Ford's incentive to cheat on the collusive agreement? Rebate Chevy's Strategies No Rebate $95 Rebate -$120 Ford's Strategies $100 $300 HII No Rebate $300 $250 -$200 $250 IV