Refer to the Normal-Form Game of Advertising Shown Below Suppose There Is a 90 Percent Chance That the Advertising

question 103

Multiple Choice

Refer to the normal-form game of advertising shown below. $\begin{array}{c}\quad\quad\quad\quad\quad\quad\text { Firm B}\\\text { Firm A }\begin{array}{|l|l|l|} \hline & \text { Advertise } & \begin{array}{l}\text { Do Not } \\\text { Advertise }\end{array} \\\hline \text { Advertise } & \$ 0, \$ 0 & \$ 175, \$ 10 \\\hline \begin{array}{l}\text { Do Not } \\\text { Advertise }\end{array} & \$ 10, \$ 175 & \$ 125, \$ 125\\\hline\end{array}\end{array}$ Suppose there is a 90 percent chance that the advertising game depicted in Figure 10-17 will end next period.The collusive agreement {(not advertise,not advertise) } is:

• A) sustainable since $175 < $138.89.
• B) unsustainable since $175 < $138.89.
• C) sustainable since $11.11 > $50.
• D) unsustainable since $11.11 > $50.

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Definitions:

Emerged

The process of coming into being or becoming important or prominent.

Slippery Slope

A fallacy in reasoning that suggests taking a minor action will lead to major and oftentimes undesirable consequences.

Gratuities

Small gifts, often money, given in appreciation for service, which can sometimes raise ethical concerns in professional relationships.

Police

A body of officers representing the civil authority of government, responsible for maintaining public order and safety, enforcing laws, and preventing, detecting, and investigating criminal activities.