Hello Christopher,
I concur with you that advertisement has a profound impact on market and consumer as well. Although the GE has a great reputation and large market share, it will not prevent Maytag from e entry the market for the high-efficiency dryers. However, the GE may be unable to prevent Maytag from market entry, but it can manage force to force it from the market. Advertising affects the way people beliefs, tastes, and attitudes. Therefore, an increase in the GE advertising budget will affect the Maytag’s forecasted profits. Thus, as you have said the GE’s equilibrium outcome would exceed $14M, and it will incur the loss of $1.5 in profit due to Maytag’s market entry. Also, an increase of the GE advertising budget will cause the Maytag’s profit to reduce substantially forcing it out of the market. Therefore, I agree with you that GE should increase its advertising expense to ensure that Maytag’s stay out of the market.
Hello Brittney,
I concur with your argument that GE cannot successfully prevent Maytag’s market entry even if the GE increases its advertising budget to $12 million. If the GE increases its advertising budget will not deter the Maytag’s from entering and creating $1 million profit. Therefore, the two companies are playing the zero-sum game since the entry of the Maytag’s in the market will gain market share and make a profit while reducing the profits and market share of the GE. Also, I concur with the assertion that GE additional advertising spending will not deter Maytag from entering the market, but it may force it out of the market. Advertising will help the GE to solidify its market share and increases the profit. This because the decision will cause Maytag’s to rethink about its anticipated budget forcing out of the market.
