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 b2 with probability 0.5 and strategy b3 with probability 0.5. Company B decides never to use strategy b1. 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 for Company A be?
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Increase
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Company BQuantity
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Extend
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|
Advertising
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Discounts
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Warranty
|
|
b1
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b2
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b3
|
|
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Increase Advertisinga1
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4
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3
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2
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Company A
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Quantity Discountsa2
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-1
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4
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1
|
|
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Extend Warranty a3
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5
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-2
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5
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