Zippy's and Tony's Are Rival Pizza Restaurants in a Small

question 192

Multiple Choice

Zippy's and Tony's are rival pizza restaurants in a small town (together they form a local duopoly) .Zippy's management determines that if it increases its advertising expenditures,it will increase profits regardless of whether Tony's increases its advertising budget.Based on this information,we can conclude that:

• A) this is a one-time game.
• B) Zippy's has a dominant strategy in this advertising game.
• C) this advertising game will reach a Nash equilibrium.
• D) Zippy's has first-mover advantages in this advertising game.

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Definitions:

Debt Financing

Raising capital through the sale of bonds, loans, or other notes to individuals or institutions.

Return on Assets

A financial ratio indicating how profitable a company is relative to its total assets.

Weighted Average Cost of Capital

An average representing the expected return on all of a company's securities, weighted according to the proportion each contributes to the total capital structure.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk.