An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 9

Consider the payoff table below that shows the percentage increase in market share for Company A for each combination of Company A and Company B strategies. Assume that Company B implements a mixed strategy by using strategy b 2 with probability 0.5 andstrategy b 3 with probability 0.5. Company B decides never to use strategy b 1. What is the expected payoff to Company A under each of its three strategies? If Company B were to always use the stated mixed strategy probabilities, what would the optimal strategy forCompany A be?