Two Stores Are Located Side by Side

question 9

Multiple Choice

Two stores are located side by side. They attract customers to each other and to themselves by advertising. The profit functions of the two stores are (45 + x₂) x₁ - 2x²₁ for store 1 and (75 + x₁) x₂ - 2x²₂ for store 2, where x₁ and x₂ are total advertising expenditures by stores 1 and 2 respectively. If each store sets its advertising expenditures independently (as in Nash equilibrium) , how much would store 1 spend on advertising?

• A) $14
• B) $19
• C) $22
• D) $17
• E) None of the above.

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Definitions:

Sleep Disorder

A condition that frequently impacts a person's ability to get enough quality sleep, often leading to functional impairment throughout the day.

REM Rebound

Increased amounts of REM sleep after being deprived of REM sleep on earlier nights.

Night Terrors

Relatively rare disorder in which the person experiences extreme fear and screams or runs around during deep sleep without waking fully.

Heroin Addiction

A severe substance use disorder characterized by the compulsive use of heroin, leading to significant health, social, and economic consequences.