ECO100Y1 Lecture : Q3 Taxis in Toronto (Medium)
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Cineplex and Empire are two rival movie theatre chains. They must each decide whether to set an admission price of $10 or set an admission price of $12; of course, the number
of movie goers (and thus their revenues) will depend both on the price they set as well as the price charged by their competitor. Their profit levels are given in the matrix below.
Ciniplex | |||
$10 | $12 | ||
Empire | $10 |
High Consumer Demand E: $7 Million C: $7 Million |
Medium Consumer Demand E: $8 Million C: $8 Million |
$12 |
Medium Consumer Demand E: $6 Million C: $8 Million |
Low Consumer Demand E: $7 Million C: $7 Million |
a) If Empire and Cineplex could cooperate, which set of actions would generate the highest
industry profit? Is that outcome likely to be achievable?
b) What is Empire's best action(s)? Does it depend on Cineplex's action?
c) What is Cineplex's best action(s)? Does it depend on Empire's move?
d) If Cineplex and Empire cannot cooperate, what outcome(s) would occur? Is there a difference
between the cooperative and non-cooperative outcome?