Consider the souffl bakers Gaston and Pierre, described in Problem 3. Suppose Gaston and Pierre are each

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Consider the soufflé bakers Gaston and Pierre, described in Problem 3. Suppose Gaston and Pierre are each faced with the choice of baking 3 or 4 soufflés each morning.

a. Calculate the profits each would earn based on the decision each makes. Insert those numbers into the table below, with Gaston’s number on the left and Pierre’s on the right.



Pierre

Bake 4 Soufflés

Bake 3 Soufflés

Gaston

Bake 4 Soufflés

_______, 

_______

_______, _______

Bake 3 Soufflés

_______, 

_______

_______, _______


b. Explain how the profits Gaston earns are conditional on the decision Pierre makes.

c. Draw parallels between this problem and the advertising game Disney and Warner Brothers play in Table 11.1.

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Microeconomics

ISBN: 9781319105563

3rd Edition

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

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