Two firms are deciding whether to advertise. The total available sales in the market is 28, that are to be split between the two firms based on their advertising decisions. Advertising costs a firm 8. In the absence of advertising, Firm 1 has a larger market share than firm 2, so it sees 16 in sales while firm 2 sees 12 in sales. If they both advertise, they split the market evenly but they each pay the advertising cost. If one firm advertises and the other does not, then the advertiser captures of the market but must pay the advertising cost while the non-advertiser captures of the market.

Is the normal form representation depicted below an accuarte depiction of the strategies and payoffs of the game described?

Transcribed Image Text:

FIRM 2 with advertising no advertising F with advertising 6,6 13,7 | R M no advertsing 7,13 16,12 1 FIRM 2 with advertising no advertising F with advertising 6,6 13,7 | R M no advertsing 7,13 16,12 1