-Two Firms Are Introducing an Improved Version of Their Toothpastes

question 65

Essay

-Two firms are introducing an improved version of their toothpastes.They must decide whether or not to advertise their products.The table above gives the payoff matrix in terms of the economic profits they expect in each case.The payoffs are in terms of millions of dollars.
a.What is the Nash equilibrium for the game?
b.If they could cooperate,what strategy would they prefer? What would be the payoff?

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Definitions:

Activity Rate

The predetermined overhead rate used in activity-based costing to allocate overhead costs to cost objects based on their usage of activities.

Engineering Change

A modification to a product’s design, production process, or materials, usually made to improve functionality or to reduce costs.

Allocation Base

A criterion or standard used to distribute overhead costs among various cost objects.

Direct Labor Dollars

The total cost of wages paid to workers directly involved in manufacturing or producing a company's products.