Two competing companies, A and B, decide on advertising intensity. If both don’t advertise, they get $5 000 000 each. If both advertise, both lower their gain to $3 000 000. If A advertises, but B doesn’t, A gets $6 000 000 and B only $2 000 000, and conversely if B advertises and A doesn’t.

• What is the Nash equilibrium in this situation?

• Is it a dominant strategy?

Answer rating: 100% (QA)

Nash Equilibrium In this scenario the Nash equilibrium is when both companies advertise A 3 million ... View the full answer