The Following Matrix Displays the Advertising Rates and the Resultant

question 40

Essay

The following matrix displays the advertising rates and the resultant profits (in thousands of dollars) for two rival newspapers in a major city.
$\begin{array}{c}\quad\quad \text { FIRM B } \\ \begin{array}{ | l | c | c | } \hline \text { FIRM A } & \text { High ad rate } & \text { Low ad rate } \\\hline \text { High ad rate } & 20,20 & 12,26 \\\hline \text { Low ad rate } & 26,12 & 15,15 \\\hline\end{array}\end{array}$ (a) Assume that the newspapers set their advertising rates independently. Determine the optimal strategy for each firm. Explain briefly.

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Definitions:

Operating Cycle

The duration of time from the acquisition of goods for resale or the start of a service to the receipt of payment from customers.

Cash Cycle

The period between the outlay of cash for raw materials and receiving payment from customers, reflecting the efficiency of a company's cash flow management.

Quarterly Receipts

Refers to the income or revenue received by a business, organization, or government on a quarterly basis.

Quarterly Disbursements

The act of paying out or distributing company funds, typically dividends or investments, on a quarterly basis.