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Telstra and Optus are competing firms running the same kind of business, and there is a constant need for sufficient information before making any decision in terms of advertising. One firm has to study and know the possible move of another to avoid losing customers. The companies can either choose to agree on a level of advertisement or disagree and use a method that favours each of them most.
The case where both the firms agree on a level of advertisement
Telstra and Optus are two companies, though Telstra is a larger one than Optus. It is expected that Telstra’s profitability should be greater compared to that of Optus. In this case, the two should agree on an option that favors both of them. If the companies agree on the first option where the both do not advertise, they can make a reasonable profit. Optus will make a profit of $500 which is good according to its size, and Telstra will gain a benefit of $1000 which is also a great result. They will enjoy such a profit because they will spare no advertisement costs.
The second option where Optus prefers to advertise and Telstra does not is favourable for Optus as it will make a profit of $700 compared to Telstra’s $500. Compared to all the other options, Optus benefits most from this approach while Telstra loses. To avoid any more loses, Telstra will decide to advertise.
The third option where Telstra decides to advertise while Optus does not is most favourable for the first company which will register the highest profit of $13000 as compared to all the other options. At this point, Optus will get the lowest profit of $100. Optus will instead decide to undertake advertising to avoid recording more loses.
The last option in the matrix is where both companies decide to advertise. At this point, Optus registers a $200 profit while Telstra has a $700 profit, considering the fact that advertisement done is very low. To both the companies, this is not the best option.
In conclusion, the best way for the two companies to run their business is if both of them do not advertise. Thus, the firms will save on advertisement cost and enjoy high profits at the same time.
The case where both firms fail to agree
In the case where both companies fail to agree on advertisement, each company will choose the way it will gain most. Optus, for instance, will chose to advertise, and this will lead it to enjoying good profit of $700. However, this benefit will only be enjoyed in the short run as if advertising, Telstra will get earnings of $700 which is quite low considering its size. This may be highly dependent on the decision taken by Telstra which is the most probable one to advertise.
Telstra will also definitely choose to advertise if the companies do not agree on a strategy. The decision taken by Telstra will lead it to earning a high profit of $1300 which is the highest sum they can gain from the options. These profits are, however, enjoyed in the short run while Optus is making a profit of $100 which is the lowest gain from the options. This will compel Optus to commence advertising in order to attract more customers and improve their profits. Eventually, both companies will advertise reducing their profits.
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