Consider Two Craft Bourbons Distilled in Brooklyn, New York: Kings

question 60

Essay

Consider two craft bourbons distilled in Brooklyn, New York: Kings County and Stillhouse.If the distilleries advertise, they can both sell more bourbon and increase their revenue.However, the cost of advertising more than offsets the increased revenue so that each distillery ends up with a lower profit than if they do not advertise.On the other hand, if only one advertises, that distillery increases its market share and also its profit.
a.Construct a payoff matrix using the following hypothetical information: If neither distillery advertises, each earns a profit of $500,000 per month.If both advertise, each earns a profit of $250,000 per month.If one advertises and the other does not, the distillery that advertises earns a profit of $750,000 and the distillery that does not advertise earns a profit of $125,000.
b.If Kings County wants to maximize profit, will it advertise? Briefly explain.
c.If Stillhouse wants to maximize profit, will it advertise? Briefly explain.
d.Is there a dominant strategy for each distiller? Briefly explain.

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Definitions:

Extinction Strategies

Methods used to phase out or discontinue products, services, or practices that are no longer beneficial or relevant.

Desirable Behaviour

Actions or reactions of an individual or group that are seen positively by a society or organization, often encouraged to maintain or promote harmony and efficiency.

Positive Reinforcement

The process of encouraging desired behavior by rewarding it, thereby increasing the likelihood of its recurrence.

Work Behaviours

Actions and attitudes that employees exhibit in the workplace, which can affect both their performance and the overall culture of the company.