5. To advertise or not to advertise Suppose that Expresso and Beantown are the only two firms that sell coffee. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Beantown Advertise Doesn't Advertise Advertise 10,10 Expresso 18. 2 Doesn't Advertise 2. 18 11, 11 des of For example, the upper right cell shows that if Expresso advertises and Beantown doesn't advertise, Expresso will make a profit of $18 million, and Beantown will make a profit of $2 million. Assume this is a simultaneous game and that Expresso and Beantown are both profit-maximizing firms. IF Expresso decides to advertise, it will earn a profit of $ advertise million of Beantown advertises and a profit of $ million if Beantown does not IF Expresso decides not to advertise, it will earn a profit of $ not advertise million if Beantown advertises and a profit of S million if Beantown does if Beantown advertises, Expresso makes a higher profit if it chooses to search Ae 0 Homework (Ch 17) If Expresso decides not to advertise, it will earn not advertise. profit of $ million if Beantown advertises and a profit of S million if Beantown does Tools If Beantown advertises, Expresso makes a higher profit if it chooses If Beantown doesn't advertise, Expresso makes a higher profit if it chooses 5 Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing? 5 Expresso will choose not to advertise and Beantown will choose to advertise, Expresso will choose to advertise and Beantown will choose not to advertise. s Both firms will choose not to advertise Both firms will choose to advertise ples of Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing? Both firms will choose to advertise. Expresso will choose to advertise and Beantown will choose not to advertise. Both firms will choose not to advertise. O Expresso will choose not to advertise and Beantown will choose to advertise I Grade It Now Save & Continue Search this course Homework (Ch 17) x If Expresso decides not to advertise, it will earn a profit of S not advertise. million if Beantown advertises and a profit of $ million of Beantown does dy Tools If Beantown advertises, Expresso makes a higher profit if it chooses Tips If Beantown doesn't advertise, Expresso makes a higher profit if it ch to advertise not to advertise Suppose that both firm's start off not advertising. If the firms act independerrymat strategies will they end up choosing? Tips Expresso will choose not to advertise and Beantown will choose to advertise. Expresso will choose to advertise and Beantown will choose not to advertise. ols Both firms will choose not to advertise Both firms will choose to advertise Gples of Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing? Both firms will choose to advertise Expresso will choose to advertise and Beantown will choose not to advertise Both firms will choose not to advertise. Expresso will choose not to advertise and Beantown will choose to advertise riado It Now Sant If Expresso decides not to advertise, it will earn a profit of 5 not advertise. million if Beantown advertises and a profit of $ million if Beantown does bols If Beantown advertises, Expresso makes a higher profit if it chooses If Beantown doesn't advertise, Expresso makes a higher profit if it chooses to advertise Suppose that both firms start off not advertising. If the firms act independe es will they end up choosing? not to advertise Expresso will choose not to advertise and Beantown will choose Expresso will choose to advertise and Beantown will choose not to advertise. s Both firms will choose not to advertise, O Both firms will choose to advertise. es of Again, suppose that both firms start off not advertising. If the firms decide to collude, what strategies will they end up choosing? Both firms will choose to advertise, Expresso will choose to advertise and Beantown will choose not to advertise. Both firms will choose not to advertise. O Expresso will choose not to advertise and Beantown will choose to advertise. Grade It Now Save & Continue