Quiz 10 ch11
Quiz 10 ch11
Quiz 10 ch11
Quiz N10
Name and Surname Mohamed sobhy attia attia hagag ug_id 201779
Tests:
3) Moral hazard is the
A) outcome of a Prisoner's Dilemma.
B) result of market signaling.
C) risk associated with a Dutch auction.
D) risk that one party to a contract may alter its post-contract behavior to the
detriment of another party.
6. The following matrix shows the payoffs for advertising game between Coke and
Pepsi. The firms can choose to advertise or to not advertise. Numbers in the matrix
represent profits; the first number in each cell is the payoff to Coke. (Numbers in
millions.)
Coke (rows) / Pepsi Advertise Don't Advertise
Managerial Economics Keti Tskhadadze
Quiz N10
(columns)
Advertise (10, 10) (500, -50)
Don't Advertise (-50, 500) (100, 100)
Answer : because as you see in above table The first number in each square refers to
the payoff for the row (horizontal] player, here coke. The second number in each square
refers to the payoff for the column (vertical) player, here pepsi. The numbers represent
the profit foe Pepsi and Coke.
In this game:
The players are Pepsi and Coke.
The strategies available each player:
coke, as the row player, can choose either Advertise or Don't
Advertise.
Pepsi , as the column player, can choose either Advertise or Don't
Advertise.
Each player gains a lot from advertising when the other player does not advertise
because the advertiser gains a larger share of the market. If both advertise, the gain is
less than if both don't advertise because advertising costs money.