Consider the decisions facing two cigarette companies, Benson Hedges and Philip Morris The following table shows how the profits of the two companies depends on their actions Benson Hedges' decision Advertise Don't advertise Philip Morris' Decision Advertise Benson Hedges get $3b profit Philip Morris get $3b profit Benson Hedges get $2b profit Philip Morris get $5b profit Don't advertise Benson Hedges get $5b profit Philip Morris get $2b profit Benson Hedges get $4b profit Philip Morris get $4b profit a) What is the dominant strategy for Benson Hedges For Philip Morris Explain b) Define Nash Equilibrium What is the Nash Equilibrium for the decision c) Define prisoner's dilemma Is this game a prisoner's dilemma Explain

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Question: Consider the decisions facing two cigarette companies, Benson & Hedges and Philip Morris. The following table shows how the profits of the two companies depends

Consider the decisions facing two cigarette companies, Benson & Hedges and Philip Morris. The following table shows how the profits of the two companies depends on their actions.

		Benson & Hedges' decision
		Advertise	Don't advertise
Philip Morris' Decision.	Advertise	Benson & Hedges get $3b profit Philip Morris get $3b profit	Benson & Hedges get $2b profit Philip Morris get $5b profit
	Don't advertise	Benson & Hedges get $5b profit Philip Morris get $2b profit	Benson & Hedges get $4b profit Philip Morris get $4b profit

a) What is the dominant strategy for Benson & Hedges? For Philip Morris? Explain.

b) Define Nash Equilibrium. What is the Nash Equilibrium for the decision?

c) Define prisoner's dilemma. Is this game a prisoner's dilemma? Explain.

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