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There are two Ford dealerships in town. Limbugh's lemons and liddy's leadfoot motors. Each of these new car dealers have three alternatives strategies that they could pursue: (1) highlight service department quality; (2) be the low price dealer on all automobile seals; or (3) hire a well known sport star and engage in extensive advertising in outlying small town and rural areas.

The payoffs (profits) of these strategies are listed below, with limbaugh's lemons profits being the first number in each cell.

Liddy's leadfoot motors
Limbaugh's Lemons Service low cost Advertising
Service 24,33 18,36 15,42
low cost 36,27 24,30 18,24
Advertising 33,18 30,24 12,18

a. Does ethier firm have a dominant strategy? How about a dominated strategy? If so, describe why and what the implications are for their strategy.

b. what do you predict will be the outcome of strategic interaction between these two firms? i.e. what strategy will each firm choose? describe

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M946216

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