Suppose that GE is trying

Suppose that GE is trying

Suppose that GE is trying to prevent Maytag from entering the market for high efficiency clothes dryers. Even though high efficiency are more costly to producem they are profitable as they command sufficiently higher prices from consumers. The following payoffs table shows the annual profits for GE and Maytag for the advertisig spending and entry decisions that they are facing: GE enter $12m,$15, stay out $0, $35m and advertising= $0.7m . Maytag enter $1m, $20m, stay out $0, $30m and advertising= $!2m.Based on this information, can GE successfully prevent Maytag from entering this market by increasing its advertising levels? What is the equiibrium outcome in this game? Suppose that an analyst at GE is convinced that ust a little bit more advertising by GE, say for another $2m, would be sufficient to deter enough customers from buying Maytag, thus yield less than $0 profits for Maytag in the event it enters. Suppose that spending an extra $2m on advdertising by GE will reduce its expected profits by $1.5m, regardless of whether Maytag enters or stays out. Would this additional spending on advertisisng achieve the effect of deterring Maytag from entering? Shoud GE pursue this option?

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