Consider the Following Information for a Simultaneous Move Game: If

question 61

Multiple Choice

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits.If neither of you advertise, you will each earn $10 million in profits.However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non advertising firm will earn $1 million.If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever) then a Nash equilibrium when the interest rate is zero is

• A)for each firm to not advertise until the rival does, and then to advertise forever.
• B)for your firm to never advertise.
• C)for your firm to always advertise when your rival does.
• D)for each firm to advertise until the rival does not advertise, and then not advertise forever.

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Definitions:

Chairman

A person appointed or elected to preside over a meeting, board, or committee.

President

The head of state and head of government in a republic, typically elected to lead the country's executive branch and implement national laws and policies.

Board of Governors

The leading body of a central bank in many countries, responsible for overseeing the management and operations of the bank.

Federal Reserve

The central banking system of the United States, responsible for managing the nation's monetary policy and regulating its financial institutions.