Question

QUESTION 5 Anheuser Busch Inbev and MillerCoors control 80% of the American beer market. The two firms were originally in a price war prior to 2008. The two firms attempted to cut their prices to gain control of a larger share of the market. However, after the Global Recession in 2008, the price of their beer has risen Answer the following questions: a. When considering whether to raise their prices, MillerCoors must consider Anheusers actions. Is this feature known as interdependence? Type Y for Yes or N for No. b. The two companies are deciding whether or not to introduce a new wheat beer into the American market. The payoff (in millions of dollars) represents the expected first year economic profit from each strategy. What will be the resulting first year economic profit from MillerCoors (the left player) after playing the game? (i.e. a value shown in the table, with no decimal places, $ sign, space or comma). Answer in millions of dollars Introduce the Beer - 10, 45 0, 85 Does not introduce 40,0 0,0 Introduce the Beer Does not introduce c. Which player has a dominated strategy? Type either A for Anheuser or M for MillerCoors. d. What is the dominant strategy for the player you chose in part c? DN for Does Not Introduce. Type IB for Introduce the Beer oir

Answer 1

Answer:

1) Yes , This feature is known as interdependence.

2) After Playing game Millercoors economic profit is $0. Since Anheuser Bucsh choose to introduce beer so Millercoors will not introduce beer to maximize its payoff.

3) Anheuser Busch has the dominant strategy.

If Millercoors chooses to introduce the beer, the Anheuser Busch will choose to introduce beer because payoff ($45) for this is greater than if anheuser busch doesn't introduce($0).

If Millercoors chooses to not introduce the beer, the Anheuser Busch will choose to introduce beer because payoff ($85) for this is greater than if anheuser busch doesn't introduce beer($0).

Hence Dominant strategy for Anheuser Busch is introduce the beer.

If Anheuser Busch chooses to introduce the beer, the Millercoors will choose to not introduce beer because payoff ($0) for this is greater than if Millercoors choose to introduce(-$10).

If Anheuser Busch chooses to not introduce the beer, the Millercoors will choose to introduce beer because payoff ($40) for this is greater than if Millercoors doesn't introduce beer($0).

Hence Millercoors will not have any Dominant strategy.

4)

Dominant strategy for Anheuser Busch is introduce the beer.