If You Advertise and Your Rival Advertises, You Each Will

question 100

Multiple Choice

If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $1 million and the non-advertising firm will earn $5 million. Which of the following is true?

• A) A dominant strategy for firm A is to advertise.
• B) A dominant strategy for firm B is to advertise.
• C) A Nash equilibrium is for both firms to advertise.
• D) None of the answers is correct.

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Definitions:

Actual Authority

The express and implied powers granted by a principal to an agent to act on their behalf.

Duty to Serve

The obligation of certain entities to provide services to all potential customers within a specified area or domain, often used in the context of utilities or public services.

Duty to Account

An obligation to provide a detailed report of financial transactions or holdings, typically mandated in fiduciary relationships or other scenarios demanding transparency and accountability.

Best Interest

The most favorable or advantageous course of action for an individual or entity, often used in legal and financial contexts to determine what practices or decisions will most benefit the party in question.