3) A SIMPLE MODEL OF MOVIE-LAUNCH TIMING Consider the following model of how movie studios might think about the optimal timing of launching a movie (and thereby entering a market). Suppose there are two studios (or movies), X and Y, and there are two holiday weekends, 1 and 2. In weekend 1, there is a total of 8 movie fans, evenly divided into regular moviegoers {A,B,C,D} and occasional moviegoers {E,F,G,H}. In weekend 2, there is a total of 8 movie fans, evenly divided into the same regular moviegoers from before {A,B,C,D} and new occasional moviegoers {I,J,K,L}. All fans want to watch movies (produced at zero cost) and the price per ticket is $1. How should we envision demand? Suppose that all moviegoers will watch a movie that they have not seen before, but will never watch a movie for a second time. Also suppose that if two previously-unseen movies are available, the customers will "flip a coin" and be split evenly, with alphabetically-earlier moviegoers choosing X and others choosing Y. E.g., if both movies are available in weekend 1, then A and B will watch X while C and D watch Y, and if both movies are still available in weekend 2, then A and B will watch Y while C and D watch X. A movie launched in weekend 1 is still available in weekend 2. a) Determine the total box office revenue (or profit) for each firm under each combination of launch weekends: (X enters in 1, b) c) Y enters in 1), (1,2), (2,1), and (2,2). TIP: Don't worry about discounting future payoffs; just add the two weekend revenues to find the total revenue for each firm. HINT: Complete the tables below! Find the pure strategy Nash Equilibrium for this 2x2 game of launch timing between X and Y. Intuitively explain the result. Critique this model. What positive things can you say about this model? What negative things can you say about this model? TIP: What seems unrealistic, overly optimistic, oversimplified, or missing from this model? Both X and Y Both X and Y Only X Both X and Y Wknd 1 Wand 2 Wknd 1 Wend 2 A ☑ B X AY BY CY C X D I J G K H L H AQUAGI A B C I J K L TTX= TTX= Only Y Both X and Y Neither Both X and Y Wknd 1 Mond 2 Wknd 1 Wand 2 D AQUAHHSH B глинопод J L A B C ISTHENED A A B I J K L FirmX Tx= Firm Y L 2 TTX= Ty: Ty= 2 x= 11x= Ty Ty= Tx=
3) A SIMPLE MODEL OF MOVIE-LAUNCH TIMING Consider the following model of how movie studios might think about the optimal timing of launching a movie (and thereby entering a market). Suppose there are two studios (or movies), X and Y, and there are two holiday weekends, 1 and 2. In weekend 1, there is a total of 8 movie fans, evenly divided into regular moviegoers {A,B,C,D} and occasional moviegoers {E,F,G,H}. In weekend 2, there is a total of 8 movie fans, evenly divided into the same regular moviegoers from before {A,B,C,D} and new occasional moviegoers {I,J,K,L}. All fans want to watch movies (produced at zero cost) and the price per ticket is $1. How should we envision demand? Suppose that all moviegoers will watch a movie that they have not seen before, but will never watch a movie for a second time. Also suppose that if two previously-unseen movies are available, the customers will "flip a coin" and be split evenly, with alphabetically-earlier moviegoers choosing X and others choosing Y. E.g., if both movies are available in weekend 1, then A and B will watch X while C and D watch Y, and if both movies are still available in weekend 2, then A and B will watch Y while C and D watch X. A movie launched in weekend 1 is still available in weekend 2. a) Determine the total box office revenue (or profit) for each firm under each combination of launch weekends: (X enters in 1, b) c) Y enters in 1), (1,2), (2,1), and (2,2). TIP: Don't worry about discounting future payoffs; just add the two weekend revenues to find the total revenue for each firm. HINT: Complete the tables below! Find the pure strategy Nash Equilibrium for this 2x2 game of launch timing between X and Y. Intuitively explain the result. Critique this model. What positive things can you say about this model? What negative things can you say about this model? TIP: What seems unrealistic, overly optimistic, oversimplified, or missing from this model? Both X and Y Both X and Y Only X Both X and Y Wknd 1 Wand 2 Wknd 1 Wend 2 A ☑ B X AY BY CY C X D I J G K H L H AQUAGI A B C I J K L TTX= TTX= Only Y Both X and Y Neither Both X and Y Wknd 1 Mond 2 Wknd 1 Wand 2 D AQUAHHSH B глинопод J L A B C ISTHENED A A B I J K L FirmX Tx= Firm Y L 2 TTX= Ty: Ty= 2 x= 11x= Ty Ty= Tx=
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:3) A SIMPLE MODEL OF MOVIE-LAUNCH TIMING
Consider the following model of how movie studios might think about the optimal timing of launching a movie (and thereby
entering a market). Suppose there are two studios (or movies), X and Y, and there are two holiday weekends, 1 and 2. In
weekend 1, there is a total of 8 movie fans, evenly divided into regular moviegoers {A,B,C,D} and occasional moviegoers
{E,F,G,H}. In weekend 2, there is a total of 8 movie fans, evenly divided into the same regular moviegoers from before
{A,B,C,D} and new occasional moviegoers {I,J,K,L}. All fans want to watch movies (produced at zero cost) and the price per
ticket is $1. How should we envision demand? Suppose that all moviegoers will watch a movie that they have not seen before,
but will never watch a movie for a second time. Also suppose that if two previously-unseen movies are available, the customers
will "flip a coin" and be split evenly, with alphabetically-earlier moviegoers choosing X and others choosing Y. E.g., if both
movies are available in weekend 1, then A and B will watch X while C and D watch Y, and if both movies are still available in
weekend 2, then A and B will watch Y while C and D watch X. A movie launched in weekend 1 is still available in weekend 2.
a) Determine the total box office revenue (or profit) for each firm under each combination of launch weekends: (X enters in 1,
b)
c)
Y enters in 1), (1,2), (2,1), and (2,2). TIP: Don't worry about discounting future payoffs; just add the two weekend revenues
to find the total revenue for each firm. HINT: Complete the tables below!
Find the pure strategy Nash Equilibrium for this 2x2 game of launch timing between X and Y. Intuitively explain the result.
Critique this model. What positive things can you say about this model? What negative things can you say about this model?
TIP: What seems unrealistic, overly optimistic, oversimplified, or missing from this model?
Both X and Y
Both X and Y
Only X
Both X and Y
Wknd 1
Wand 2
Wknd 1
Wend 2
A ☑
B X
AY
BY
CY
C X
D
I
J
G
K
H
L
H
AQUAGI
A
B
C
I
J
K
L
TTX=
TTX=
Only Y
Both X and Y
Neither
Both X and Y
Wknd 1
Mond 2
Wknd 1
Wand 2
D
AQUAHHSH
B
глинопод
J
L
A
B
C
ISTHENED
A
A
B
I
J
K
L
FirmX
Tx=
Firm Y
L
2
TTX=
Ty:
Ty=
2
x=
11x=
Ty
Ty=
Tx=
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