Table 11-6 Godrickporter and Star Connections Are the Only Two Airport Shuttle

question 182

Multiple Choice

Table 11-6
$\begin{array}{c} \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad\text { Godrickporter's (G) Choices }\\\text { Star Connections' (S) Choices }\begin{array}{|c|c|c|}\hline & {\begin{array}{c}\text { Increase } \\\text { advertising } \\\text { budget }\end{array}} & {\begin{array}{c}\text { Leave } \\\text { advertising } \\\text { budget as is }\end{array}} \\\hline \begin{array}{c}\text { Increase advertising } \\\text { budget }\end{array} & \begin{array}{c}\mathrm{G}: \$ 16,000 \text { profit } \\\mathrm{S}: \$ 8,000 \text { profit }\end{array} & \begin{array}{c}\mathrm{G}: \$ 12,000 \text { profit } \\\mathrm{S}: \$ 15,000 \text { profit }\end{array} \\\hline \begin{array}{c}\text { Leave advertising } \\\text { budget as is }\end{array} & \begin{array}{l}\mathrm{G}: \$ 8,000 \text { profit } \\\mathrm{S}: \$ 10,000 \text { profit }\end{array} & \begin{array}{l}\mathrm{G}: \$ 6,000 \text { profit } \\\mathrm{S}: \$ 12,000 \text { profit }\end{array} \\\hline\end{array}\end{array}$
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 11-6 shows the payoff matrix for this advertising game.
-Refer to Table 11-6.Is there a dominant strategy for Star Connections and if so,what is it?

• A)No, its outcome depends on what Godrickporter does.
• B)Yes, Star Connections should increase its advertising spending.
• C)Yes, Star Connections should reduce its advertising spending.
• D)Yes, Star Connections' dominant strategy is to collude with Godrickporter.

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Definitions:

Colgate Doctrine

A legal principle allowing manufacturers to set minimum retail prices for products under certain conditions without violating antitrust laws.

Suggested Resale Prices

Recommendations made by manufacturers or wholesalers on the price at which goods should be sold to the public.

Sherman Act

A landmark federal statute in the antitrust law that prohibits monopolistic practices and promotes competition.

Domestic Corporation

A company that is registered, established, and operates within the legal jurisdiction of its home country.