Dave and Andy Are Competitors in a Local Market

question 409

Multiple Choice

Dave and Andy 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 $4,000.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 $6,000 and the other will earn $5,000.If one advertises on TV and the other does not advertise,then the one advertising on TV will earn $11,000 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 Dave will

• A) advertise on TV and earn $4,000.
• B) advertise on radio and earn $7,000.
• C) advertise on TV and earn $11,000.
• D) not advertise and earn $10,000.

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Definitions:

Multiple Regression Model

A technique in statistics used to determine how a dependent variable is influenced by two or more independent variables.

Independent Variables

Elements within a model or an experiment that are intentionally modified to gauge their influence on variables that depend on them.

Units

Basic quantities or entities used to express measurements, counts, or in some contexts, the objects of study.

Regression Model

A mathematical model used to predict or explain the relationship between a dependent variable and one or more independent variables.