Consider two strategically dependent firms in an oligopolistic industry: Firm A and Firm B. Firm A knows that if it offers extended warranties on its products but Firm B does not, it will earn $6 million in profits, and Firm B will earn $2 million. Likewise, Firm B knows that if it offers extended warranties but Firm A does not, it will earn $ 6 million in profit, and Firm A will earn $2 million. The two firms know that if they both offer extended warranties on their products, each will earn $3 million in profits. Finally, the two firms know that if neither offers extended warranties, each will earn $5 million in profits.
1. Create a pay off matrix that fits the situation faced by the two firms.
2. What is the dominant strategy in this situation? Explain.
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firm in an oligopolistic industry
A firm in an oligopolistic industry has the following demand and total cost equations
P = 600 - 20Q
TC = 700 + 160Q + 15Q squared
A. Quantity at which profit is maximized
B. Maximum profit
C. Quantity at which revenue is maximized
E. Maximum quantity at which profit will be at least $850
F. Maximum revenue at which profit will be at least $580View Full Posting Details