NOTE: Please answer parts I, II & III. The following is a payoff matrix showing

Q: NOTE: Please answer parts I, II & III. The following is a payoff matrix showing

1 Papa Johns would eliminate $3 mill; Pizza Hut would eliminate $1 mill. 2. Papa Johns wouldn't eliminate either; Pizza Hut would eliminate $2 mill. 3. Both would choose $3 mill.

ID: 1200839 • Letter: N

Question

NOTE: Please answer parts I, II & III.

The following is a payoff matrix showing profit in millions of dollars when two companies simultaneously decide on various advertising budgets ($1million, $2 million, or $3 million):

Pizza Hut

$1 mill

$2 mill

$3 mill

$1 mill

$60 / $55

70 / 60

20 / 65

Papa Johns

$2 mill

80 / 40

40 / 55

60 / 50

$3 mill

85 / 35

67 / 45

65 / 55

I. In the first round of strategy elimination (when all three possible budgets are under consideration), which ad budget would the companies exclude?

A. Papa Johns would eliminate $2 mill; Pizza Hut would eliminate $1 mill.

B. Papa Johns would eliminate $3 mill; Pizza Hut would eliminate $1 mill.

C. Papa Johns would eliminate $1 mill; Pizza Hut would eliminate $2 mill.

D. Papa Johns would eliminate $2 mill; Pizza Hut would eliminate $2 mill.

II. After the first round of elimination (previous question), would either company make a second-round elimination?

A. Both companies eliminate $2 mill in the second round.

B. Papa Johns would eliminate $1 mill; Pizza Hut wouldn't eliminate either.

C. Papa Johns wouldn't eliminate either; Pizza Hut would eliminate $2 mill.

D. Neither company would eliminate in the second round.

III. What would be the likely outcome of this simultaneous advertising decision (i.e. what ad budget would each company end up choosing)?

A. Papa Johns would choose $1 mill; Pizza Hut would choose $2 mill.

B. Both would choose $3 mill.

C. Papa Johns would choose $3 mill; Pizza Hut would choose $1 mill.

D. Both would choose $2 mill.