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:

Cash Flows

The sum total of financial transactions directed into and out of a corporation, markedly influencing its cash flow.

Depreciable Asset

An asset that loses value over time and for which depreciation can be applied for tax and accounting purposes.

Capital Gain

The profit earned from the sale of an asset that has increased in value over its purchase price.

Selling Price

The price at which a product or service is sold to customers, which can cover the cost of production and include a profit margin.