Table 17-2 Suppose That Two Firms Determine That Each Could Lower Its

question 343

Multiple Choice

Table 17-2
Suppose that two firms determine that each could lower its costs and increase its profits if both reduced their advertising budgets.But in order for the plan to work,each firm must agree to refrain from advertising.Each firm believes that advertising works by increasing the demand for the firm's product,but each firm also believes that if neither firm advertises,the cost savings will outweigh the lost sales.The table below lists each firm's individual profits:
Firm A
Breaks agreement Maintains agreement
and advertises and does not advertise

-Refer to Table 17-2.Which of the following statement(s) correctly characterizes the outcome of this game?

• A) Both Firm A and Firm B have a dominant strategy to advertise.
• B) There is a Nash equilibrium when both firms advertise.
• C) Although both firms collectively would earn higher profits by maintaining the agreement not to advertise,self-interest will cause each firm to break the agreement.
• D) All of the above are correct.

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Definitions:

Human Rights Legislation

Laws and regulations designed to protect individuals against discrimination and ensure equality in various aspects of life, including the workplace.

Reward Performance

The practice of recognizing and compensating employees based on their work performance, often aimed at motivating and retaining talent.

Poor Productivity

Lower than expected or desired output or efficiency from a worker or group of workers, affecting overall organizational performance.

Indirect Discrimination

A type of discrimination that occurs when policies, practices, rules, or measures that appear neutral result in unequal treatment or impacts on a particular group without justification.