Question

Bud (red squares) 20,000 litres 10,000 litres Bud and Wise are the only two producers of aniseed beer, a New Age product designed to displace root beer. They know that if they both limit production to 10,000 litres a day, they will make the maximum attainable joint profit of $200,000 a day—$100,000 a day each. They also know that if either of them produces 20,000 litres while the other produces 10,000 litres a day, the one that produces 20,000 litres will make an economic profit of $250,000 and the one that sticks with 10,000 litres will incur an economic loss of $150,000. And they know that if they both increase production to 20,000 litres a day, they will both make zero economic profit. 20,000 litres Wise (blue squares) Construct a payoff matrix for the game that Bud and Wise must play. >>> The payoffs in the matrix are in dollars. Do not enter a dollar sign. >>> If the firm incurs an economic loss, indicate the loss with a minus sign. If the firm makes an economic profit, do not include a plus sign. 10.000 litres

Answer 1

Bud (red squares) 20,000 litros 10,000 litres $0 $-150,000 20,000 litres $ 0 $ 250,000 Wise (blue squares) $250,000 $100,000 10,000 litres $-1500 -150000 $100,000