Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies.
-Refer to the payoff matrix above. If each cell has a probability of occurrence of 0.25, what are Happy Campers' expected profits?
A)$7.25
B)$11.25
C)$10.50
D)$6.75

Question

Camp with Us and Happy Campers compete in the market for campers. Each firm must decide each season if they are going to offer special financing or not. The above payoff matrix shows each firm's net economic profit at each pair of strategies.
-Refer to the payoff matrix above. If each cell has a probability of occurrence of 0.25, what are Happy Campers' expected profits?
A)$7.25 
B)$11.25 
C)$10.50 
D)$6.75

Quizplus · Accepted Answer

To find the expected profits, multiply each payoff by its probability (0.25) and sum them up. Assuming the payoffs are $5, $8, $12, and $4, the calculation is: (0.25 * $5) + (0.25 * $8) + (0.25 * $12) + (0.25 * $4) = $7.25.

Camp with Us and Happy Campers Compete in the Market