Question
assume the huawei and xiaomi have a large inventory of mid-range smart phone that they would like to sell before a new generation of faster,
assume the huawei and xiaomi have a large inventory of mid-range smart phone that they would like to sell before a new generation of faster, cheaper mid-range smart phone is introduced. assume that the question facing each competitor is whether or not they should widely advertise a “discounted” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. if both aggressively promote their products with a nationwide advertising campaign, each will earn profits of $6 million. f one advertises while the other does not, the firm that advertises will earn $15 million, while the one that does not advertise will earn $2 million. if neither advertises, both will earn $11 million. assume this is a one-shot game, and both firms seek to maximize profits. xiaomi promotion strategy advertise don’t advertise huawei advertise $ 6 million $ 6 million $ 15 million $ 2 million don’t advertise $ 2 million $ 15 million $ 11 million $ 11 million a. what is the dominant strategy for each firm? are these also secure strategies? b. what is the nash equilibrium? c. would collusion work in this case?
Step by Step Solution
3.23 Rating (144 Votes )
There are 3 Steps involved in it
Step: 1
a Both firms have advertise as their dominant strategy Xiaomi Dominant strategy is advertise We consider the first strategy Huawei that is to advertis...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started