hw07_2008 (2) - UNC-Wilmington Department of Economics and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
UNC-Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Homework 7 (Due December 3rd, 5pm) Simultaneous, Repeated, and Sequential Games 1) Suppose the local Wal-Mart and Target stores are trying to decide whether or not to run advertisements in the paper announcing a big pre-holiday sale. They each must inform the paper secretly a week in advance about their intentions, and they each have a contract with the paper to keep their advertisement orders secret. The local store managers see each other at the country club, and they discuss how horrible pre-holiday price discounts are for profits, and they each say that they intend to avoid pre-holiday sales this year. After the managers get back to their offices, they each sit down to decide whether or not to place an advertisement in the paper. Suppose they each come up with approximately the same assessment of their payoffs, depending on their advertisement choices, as illustrated in the payoff matrix below: Payoffs ($ millions) Target No Ad Advertise Wal Mart No Ad Advertise What will each firm choose to do? Briefly, explain why using game theory terms. 2) Suppose there are two large department stores, Gacy's and Mimbel's, each of which needs to choose a location for its one mega-store in Gotham City. Each store will choose one of four locations: Uptown, Center City, East Side, or West Side. If both companies locate in the same part of town, they will split the market, depressing profits--they will typically make more money locating in different markets. Mimbel's stylish reputation sells particularly well on the wealthy East Side. Gacy's reputation for value sells particularly well on the middle-class West Side. No one does very well Uptown, an area that is a bit down at the heels. Center City draws its
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/22/2009 for the course ECN 321 taught by Professor Dumas during the Fall '08 term at University of North Carolina Wilmington.

Page1 / 3

hw07_2008 (2) - UNC-Wilmington Department of Economics and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online