If You Advertise and Your Rival Advertises,you Each Will Earn

question 61

Multiple Choice

If you advertise and your rival advertises,you each will earn $3 million in profits.If neither of you advertises,you will each earn $7 million in profits.However,if one of you advertises and the other does not,the firm that advertises will earn $10 million and the non-advertising firm will earn $1 million.If you and your rival plan to be in business for 15 years,then the Nash equilibrium is for:

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

---

Definitions:

Standard Deviation

A statistical measure of the dispersion of a set of data from its mean, often used to quantify the risk associated with a particular investment.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature in one year or less, representing a secure, low-risk investment option.

Optimal Weights

The most efficient proportion of different assets in an investment portfolio, aiming to maximize returns and minimize risk.

Expected Rate

The anticipated return or yield on an investment or financial instrument over a certain period.