Lori and Maya Are Competitors in a Local Market

question 488

Multiple Choice

Lori and Maya 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 $10,000. If they both advertise on radio, each will earn a profit of $14,000. If neither advertises at all, each will earn a profit of $20,000. If one advertises on TV and other advertises on radio, then the one advertising on TV will earn $16,000 and the other will earn $6,000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $30,000 and the other will earn $4,000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $24,000 and the other will earn $8,000. If both follow their dominant strategy, then Lori will

• A)advertise on TV and earn $10,000.
• B)advertise on radio and earn $14,000.
• C)not advertise at all and earn $20,000.
• D)None of the above is correct. Lori and Maya do not have dominant strategies.