Using game theory, set up a payoff matrix similar to one that Volkswagon\'s mana

Question

Using game theory, set up a payoff matrix similar to one that Volkswagon's managment might employ in analyzing the problem presented in Discussion Question 5.

(Discussion Question 5) Suppose that Volkswagon hires a popular singer to advertise its compact automobiles. The campaign is very successful, and the company increases its share of the compact-car market substantially. What is Ford likely to do?

Please read all parts of question carefully and FULLY answer question by developing a payoff matrix.

Explanation / Answer

ANSWER Ford is actually following MC firms sell products that have real or perceived non-price differences. However, the differences are not so great as to eliminate other goods as substitutes. Technically, the cross price elasticity of demand between goods in such a market is positive. In fact, the XED would be high.[7] MC goods are best described as close but imperfect substitutes.[7] The goods perform the same basic functions but have differences in qualities such as type, style, quality, reputation, appearance, and location that tend to distinguish them from each other. For example, the basic function of motor vehicles is basically the same - to move people and objects from point A to B in reasonable comfort and safety. Yet there are many different types of motor vehicles such as motor scooters, motor cycles, trucks, cars and SUVs and many variations even within these categories.

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