Table 14-1 Godrickporter and Star Connections Are the Only

question 193

Multiple Choice

Table 14-1 Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 14-1 shows the payoff matrix for this advertising game.
-Refer to Table 14-1. Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of $6,000 and Star Connections earns a profit of $12,000. Is there an incentive for any one firm to increase its advertising budget?

• A) No, neither firm has an incentive to raise its advertising spending.
• B) Yes, both firms have an incentive to raise their advertising budgets.
• C) Yes, Star Connections has an incentive to increase its advertising budget, but Godrickporter does not.
• D) Yes, Godrickporter has an incentive to increase its advertising budget, but Star Connections does not.