Choice of Advertising Strategy for New and Established Companies

A mousetrap has a thousand customers and only two suppliers, Mousekill and and Poisonpest. Poisonpest is the established supplier, and Mousekill is a newcomer. Each company can advertise on TV or in print. A marketing agency, Scumslick, calculates that if both companies advertise only on TV, then Poisonpest will take 40,000 customers and lose 60,000 customers to Poisonpest. If both use only print, then each gets 50,000 customers. If Mousekill uses print and Poisonpest uses TV, then Mousekill gets 60,000 customers. If Mousekill uses TV and Poisonpest uses print, then each gets 50,000 customers.,Br /> The payoff matrix for Mousekill is:
Mousekill\Poisonpest TV Print
TV 40,000 50,000
Print 60,000 50,000
The table shows the number of customers taken away from Poisonpest, initially the dominant supplier, by Mousekill, the newcomer. For each choice of advertising that Mousekill makes, the company is assured of attracting the least number of customers in the corresponding row. Mousekill will choose the advertising strategy that maximises the guaranteed number of customers and will choose to advertise in print, giving him at least 50,000 customers, as opposed to at least 40,000 customers if the company chose to advertise on TV.
Poisonpest wishes to minimise the loss of customers to Mousekill, so will chose the strategy that minimises the guaranteed loss of custom. If he chooses to advertise on TV, he could lose up to 60,000 customers and if they choose to advertise in print, they could lose up to 50,000 customers. They will therefore choose to advertise in print.
Both players will choose to advertise in print. The entry in the payoff matrix is a saddle point, sine the maximum of the row minimums (row maximin) equals the minimum of the column maximums (column minimax). The game has value 50,000.

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