Table 9-8 Firm a (Alistair's) and Firm B (Baine's)

question 274

Multiple Choice

Table 9-8 Firm A (Alistair's) and Firm B (Baine's) are the only firms selling luggage in the upscale city of Adelaide. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 9-8 shows the payoff matrix for this advertising game.
-Refer to Table 9-8.If Alistair assumes that Baine would increase its advertising budget,what should it do?

• A) Alistair should keep its own budget the same and allow Baine to incur the higher cost.
• B) Alistair should also increase its advertising spending.
• C) Alistair should reduce its advertising spending.
• D) Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 per cent market share.

---

Definitions:

Situational Cues

Environmental or contextual factors that influence individuals' behavior or decision-making processes.

Individualism-collectivism

A cultural dimension that explores the degree to which individuals are integrated into groups and prioritize group goals over personal desires.

Interdependence

A relationship between entities where each is mutually dependent on the other.

Independence

The state or condition of having the autonomy to make decisions or take actions without reliance on others.