Refer to the following formula for expected payoff Expected payoff (Probability of rival matching Loss from price cutj (Probability of rival not matching Gain from price cut) Suppose the payoff to each of four strategic interactions is as follows Rival Response Your Company's Action Reduce Price Don't Reduce Price Gain $36.000 No loss or gain Reduce price Loss $7.500 Don't reduce price Loss $35.000 Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. If the probability of rivals matching a price reduction is 90 percent, what is the expected payoff of a price cut? 7800 b. If the probability of rivals reducing price even though you dont reduce your price is 3 percent, what is the expected payoff of not reducing price? 7800

Refer to the following formula for expected payoff Expected payoff (Probability of rival matching Loss from price cutj (Probability of rival not matching Gain from price cut) Suppose the payoff to each of four strategic interactions is as follows Rival Response Your Company's Action Reduce Price Don't Reduce Price Gain $36.000 No loss or gain Reduce price Loss $7.500 Don't reduce price Loss $35.000 Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. If the probability of rivals matching a price reduction is 90 percent, what is the expected payoff of a price cut? 7800 b. If the probability of rivals reducing price even though you dont reduce your price is 3 percent, what is the expected payoff of not reducing price? 7800

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.6P

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