Question

Please CLEARLY indicate the correct answer for each box and explain why. Thank you!

Hal and Nick are the only producers of a new type of laundry bleach designed to displace conventional laundry bleach. They are trying to figure out how much of the new bleach to produce. They know three things: 1. If they both limit production to 10,000 bottles a day, they will make the maximum attainable joint profit of 360,000 a day $180,000 a day each. 2. If one of them produces 30,000 bottles a day while the other produces 10,000 a day, the one that produces 30,000 will make an economic profit of $315,000 and the one that sticks with 10,000 bottles will incur an economic loss of $50,000. 3. If they both increase production to 30,000 bottles a day, they will both make zero economic profit. Hal's strategies red squares) 10,000 bottics 0,000 botties 10,000 bottles Complete the payoff matrix for the game that Hal and Nick must play. Each cell shows their econornic profit >>> Use a minus sign for a loss. Do not use a plus sign for a profit. Do not enter a S sign. Nick's strategies (blue squares) 30,000 botties

Answer 1

1. If both produce only 10,000 bottles each per day then each of them gets a profit of $180,000 per day.

2. If one of them produce 30,000 bottles while other produces 10,000 bottles then person producing 30,000 bottles gets profit of $315,000 and the one producing 10,000 bottles gets a profit of $50,000.

3. If both of these produce 30,000 bottles then both will get zero economic profit.

With regards to the pay-off matrix, if we analyze the upper left corner of the matrix then we can see that both Hal and Nick are producing 10,000 bottles. So, each of them will get a profit of $180,000 per day.

With regards to the pay-off matrix, if we analyze the upper right corner of the matrix then we can see that Hal is producing 30,000 bottles while Nick is producing 10,000 bottles. So, Hal will get a profit of $315,000 while Nick will get a profit of $50,000.

With regards to the pay-off matrix, if we analyze the bottom corner of the matrix then we can see that Hal is producing 10,000 bottles while Nick is producing 30,000 bottles. So, Hal will get a profit of $50,000 while Nick will get a profit of $315,000.

With regards to the pay-off matrix, if we analyze the bottom right corner of the matrix then we can see that both Hal and Nick are producing 30,000 bottles. So, each of them will get a profit of $0 per day.

Following is the complete pay-off matrix -

Hal's strategios (red squares) 10,00D botties 30,000 bottiles 180000 315000 10,000 50000 Nick' botties 180000 strategies (blue squares) 50000 30,000 bottes 315000