Suppose a firm is composed of 2 divisions - one that produces cheese and the oth

Question

Suppose a firm is composed of 2 divisions - one that produces cheese and the other that produces crackers. The cheese division is run out of Milwaukee, while the cracke is run out Denver. The firm also runs 2 distribution centers- one in Kansas City. The manager of the cheese division and the cracker division are each B the choice of which distribution center they would like to distribute their product and the payoffs associated with each choice are given in the table below in Chicago and the other through, Crackers Chicago Kansas City CheeseChicagoCheese: $90K, Crackers: $50K Cheese: $80K, Crackers: $45K a) Does either the cheese division or the crackers division have a dominant strategy. If so what are they? b) Assuming that each division makes its decision simultaneously, what is the Nash equilibrium of this game? Is it unique? Now assume that instead of making a decision simultaneously, the cheese division is allowed to make their decision first, followed by the cracker division. What would be the equilibrium outcome of this sequential game? Would the outcome change if instead the cracker division went first in deciding their distribution center? Why? c)

Explanation / Answer

1.

When Cracker chooses Chicago, Cheese will choose Chicago

When Cracker chooses Kansas, Cheese will choose Kansas

Thus, Cheese has no dominant strategy

Similarly, Cracker has no dominant strategy

2.

Nash: (Chicago,Chicago) and (Kansas,Kansas)

3.

If Cheese goes first, nash will be: Kansas,Kansas

If Cracker goes first, nash will be: Chicago,Chicago

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.