Consider the Following Information for a Simultaneous Move Game: If

question 52

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 advertises,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 be in business for 10 years,then the Nash equilibrium is:

• A) for each firm to advertise every year.
• B) for neither firm to advertise in early years, but to advertise in later years.
• C) for each firm to not advertise in any year.
• D) for each firm to advertise in early years, but not advertise in later years.

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Definitions:

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