Consider Two Single-Malt Whiskey Distillers, Laphroaig and Knockando

question 22

Essay

Consider two single-malt whiskey distillers, Laphroaig and Knockando.If they advertise, they can both sell more whiskey and increase their revenue.However, the cost of advertising more than offsets the increased revenue so that each distiller ends up with a lower profit than if they do not advertise.On the other hand, if only one advertises, that distiller increases its market share and also its profit.
a.Construct a payoff matrix using the following hypothetical information: If neither distiller advertises: each earns a profit of $35 million per year.If both advertise: each earns a profit of $20 million per year.If one advertises and the other does not: the distiller who advertises earns a profit of $50 million and the distiller who does not advertise earns a profit of $9 million.
b.If the two distillers agree to coordinate their strategies, what is the outcome?

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Definitions:

Dealer

A person or business that buys and sells products or services, often acting as a middleman between the manufacturer and the consumer.

Imprecise Term

A term that lacks specificity and clarity, often leading to ambiguous interpretation.

Logistical Functions

Activities involved in obtaining, producing, and distributing materials and products in the proper place and in proper quantities.

Marketing Channel

Routes or pathways through which goods and services flow from producers to consumers, often involving intermediaries such as wholesalers and retailers.