Disney and Paramount are both releasing an animated movie at the same time. Each company is fairly well known, and they are both deciding between pursuing two advertising strategies. Each firm knows that its profits will be affected by its own decision and the decision of the competing firm. The payoff matrix contains the estimated profits for both companies for all possible strategies. Paramount's profits are in the lower (green) triangle of each cell and Disney's profits are in the upper (blue) triangle of each cell. Profits (payoffs) are in millions of dollars. Disney Strategy 1 Strategy 2 Paramount Strategy 1 A $75 $75 B $25 $300 Strategy 2 C $300 $25 D $150 $150 What is Disney's dominant strategy? strategy 1 strategy 2 Disney does not have a dominant strategy. What is the Nash equilibrium in this game? B There is not a Nash equilibrium. A C D

Question

Melissa Cook

Business

9 January, 11:37

Disney and Paramount are both releasing an animated movie at the same time. Each company is fairly well known, and they are both deciding between pursuing two advertising strategies. Each firm knows that its profits will be affected by its own decision and the decision of the competing firm. The payoff matrix contains the estimated profits for both companies for all possible strategies. Paramount's profits are in the lower (green) triangle of each cell and Disney's profits are in the upper (blue) triangle of each cell. Profits (payoffs) are in millions of dollars. Disney Strategy 1 Strategy 2 Paramount Strategy 1 A $75 $75 B $25 $300 Strategy 2 C $300 $25 D $150 $150 What is Disney's dominant strategy? strategy 1 strategy 2 Disney does not have a dominant strategy. What is the Nash equilibrium in this game? B There is not a Nash equilibrium. A C D

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Bart · Answer 1

we can prepare a matrix to determine the best strategy:

Disney

strategy 1 strategy 2

$75 / $25 /

strategy 1 $75 $300

Paramount

strategy 2 $300 / $150 /

$25 $150

What is Disney's dominant strategy?

Disney's dominant strategy is strategy 1 with an expected value = $75 + $300 = $375. Strategy 2's expected value is only $175.

Paramount's dominant strategy is strategy 1 with an expected value = $75 + $300 = $375. Strategy 2's expected value is only $175.

What is the Nash equilibrium in this game?

There is a Nash equilibrium because both players' (Disney and Paramount) dominant strategy is Strategy 1.