Consider two firms 1 and 2 engaging into the following one-shot game: if firm 1 advertises and
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Consider two firms 1 and 2 engaging into the following one-shot game: if firm 1 advertises and firm 2 does not, firm 1 will make $20 million in profits and firm 2 will make $6 million. If firm 2 advertises and firm 1 does not, firm 1 will make $2 million and firm 2 will make $6 million. If firm 1 advertises and firm 2 advertises, each firm earns $10 million. If neither firm advertises, firm 2 will make $8 million and firm 1 will make $4 million.
(a) Write the payoff matrix for the above game.
(b) Does firm 1 have a dominant strategy?
(c) Does firm 2 have a dominant strategy?
(d) What is the Nash equilibrium for this one-shot game? Explain your answers.
Related Book For
Industrial Organization Markets and Strategies
ISBN: 978-1107069978
2nd edition
Authors: Paul Belleflamme, Martin Peitz
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