The Managers of Alpha and Beta Must Make Repeated Advertising

question 3

Multiple Choice

The managers of Alpha and Beta must make repeated advertising decisions simultaneously at the beginning of every month. They choose either low or high levels of advertising expenditure. They both employ a discount rate of 2.5 percent per month. Use the payoff table shown below to answer Questions .
$\begin{array} { l } &\text {Beta's advertising }\\ \text {Alpha's advertising }&\begin{array}{l|l|l|}& \text {High }& \text { Low }\\\hline High &\mathrm{A}&\mathrm{B}\\& {\$ 7,000, \$ 3,500} &{\$ 2,000, \$ 6,500} \\\hline Low &\mathrm{C}&\mathrm{D}\\&{\$ 8,000} \$ 1,000 & {\$4,000, \$ 2,000} \\\hline\end{array}\\\end{array}$
-When Alpha punishes Beta with a retaliatory adjustment in its advertising expenditures, Beta will suffer an undiscounted penalty of $_________ for each month that punishment continues.

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Definitions:

Abiding by Rules

The act of following established guidelines, regulations, or laws within a given context or environment.

Divergent Thinking

A cognitive approach or technique designed to produce inventive concepts through the examination of numerous potential answers.

Programmed Decision

involves using established procedures or rules to address recurring problems or situations, facilitating consistency and efficiency in decision-making.

Escalation of Commitment

The phenomenon where people continue to invest in a decision or project despite evidence of its failure, often due to pride or fear of loss.