Essay
Two rival cosmetics brands are considering launching a new product. If Firm 1 launches a product for older women while Firm 2 targets college students, Firm 1 will earn $40,000, while Firm 2 will earn $50,000. If both the firms launch a product for older women, Firm 1 will earn $20,000, while Firm 2 will earn $15,000. If Firm 1 launches a product for college students while Firm 2 targets older women, Firm 1 will earn $60,000, while Firm 2 will earn $40,000. If both firms target college students, both firms will earn $30,000. However, Firm 2 will choose its target consumers after Firm 1 has chosen its target consumers.
a) Draw a game tree to represent this situation.
b) What is the equilibrium outcome of this game?
c) Will there be a change in the equilibrium outcome if the firms make decisions simultaneously?
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a) The game tree for this game is shown ...View Answer
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