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At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, .....for

At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, ".....for the pastseveral years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. The payoff matrix for Kellogg and its rival to advertise or "don't advertise" is given below

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At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, ".....for the past several years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make it a leader in is given below the cereal industry. The payoff matrix for Kellogg and its rival to advertise or "don't advertise Kellogg's Rival Advertise Don't Advertise Advertise (0, 0) (52, -4) Kellogg Don't (-4, 52) (12, 12) Advertise (a) If this were a simultaneous move one shot game, what would the Nash equilibrium outcome be? Please explain. (b) Assuming that the game is still played once, if the firms could collude, what would the collusive outcome be, assuming that they made a collusive agreement and followed the agreement. Please explain. (c) Now suppose the game is infinitely repeated. If the interest rate is 35 percent. can you do better in the infinitely repeated game with a trigger strategy than you could in a one-shot play of the game? Explain. D, Focus

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