Suppose That Fizzy Soda and Townie Soda Must Choose Whether

question 112

Multiple Choice

Suppose that Fizzy Soda and Townie Soda must choose whether to advertise their soft drinks. In a Nash equilibrium, both firms choose to advertise and earn weekly profits of $80,000. Which of the following statements is (are) TRUE?
I. Neither firm has incentive to change its advertising strategy, given the strategy choice of its rival.
II. If Townie Soda decided to stop advertising, its profits would fall below $80,000.
III. If both firms stopped advertising, it is possible that each firm could earn profits greater than $80,000.

• A) I
• B) II and III
• C) I, II, and III
• D) I and II

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Definitions:

Self-Verification

The desire to be understood and acknowledged by others according to one's firmly held beliefs and feelings about oneself.

Induced Hypocrisy

This psychological concept involves making individuals aware of the discordance between their attitudes and behaviors to motivate them to change their behavior to align with their expressed attitudes.

Misattribution

Incorrectly identifying the source of a memory or emotion, leading to inaccurate conclusions or feelings.

Negative Affective State

A mood or emotional condition characterized by feelings such as sadness, anxiety, or anger.