Table 17-29 Suppose That Two Firms, Wild Willy's Wonderdrink (Firm W) and W)

question 485

Multiple Choice

Table 17-29
Suppose that two firms, Wild Willy's Wonderdrink (Firm W) and Hyper Hank's Hydration (Firm H) , comprise the market for energy drinks. Each firm determines that it could lower its costs and increase its profits if both firms reduced their advertising budgets. But for the plan to work, each firm must agree to refrain from advertising. Each firm believes that advertising works by increasing the demand for the firm's energy drinks, but each firm also believes that if neither firm advertises, the cost savings will outweigh the lost sales. The table below lists each firm's individual profits:
Firm W
Breaks agreement Maintains agreement
and advertises and does not advertise
-Refer to Table 17-29 Does either Firm W or Firm H have a dominant strategy?

• A)Both Firm W and Firm H have a dominant strategy.
• B)Neither Firm W nor Firm H has a dominant strategy.
• C)Firm W has a dominant strategy, but Firm H does not.
• D)Firm W does not have a dominant strategy, but Firm H does.

---

Definitions:

Surety

A surety involves a third party agreeing to take on the obligation of paying back a debt or performing a duty if the primary obligor fails to do so.

Creditor

A person or entity to whom money is owed by another entity, known as the debtor, for goods, services, or loans provided.

Debtor's Debt

The obligation of money owed by a debtor to a creditor.

Mechanic's Lien

A legal claim against a property by a contractor or subcontractor for unpaid labor or materials provided for improvements to the property.