Barb and Sue Are Competitors in a Local Market

question 251

Multiple Choice

Barb and Sue are competitors in a local market.Each is trying to decide if it is better to advertise on TV,on radio,or not at all.If they both advertise on TV,each will earn a profit of $5,000.If they both advertise on radio,each will earn a profit of $7,000.If neither advertises at all,each will earn a profit of $10,000.If one advertises on TV and other advertises on radio,then the one advertising on TV will earn $8,000 and the other will earn $3,000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $15,000 and the other will earn $2,000.If one advertises on radio and the other does not advertise,then the one advertising on radio will earn $12,000 and the other will earn $4,000.If both follow their dominant strategy,then Barb will

• A) advertise on TV and earn $5,000.
• B) advertise on radio and earn $7,000.
• C) not advertise at all and earn $10,000.
• D) None of the above is correct. Barb and Sue do not have dominant strategies.