Consider the Following Information for a Simultaneous Move Game: If

question 34

Multiple Choice

Consider the following information for a simultaneous move game: If you advertise and your rival advertises,you each will earn $5 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 $15 million and the non-advertising firm will earn $1 million.If you and your rival plan to hand your business down to your children (and this "bequest" goes on forever) ,then a Nash equilibrium when the interest rate is zero is:

• A) for each firm to not advertise until the rival does, and then to advertise forever.
• B) for your firm to never advertise.
• C) for your firm to always advertise when your rival does.
• D) for each firm to advertise until the rival does not advertise, and then not advertise forever.

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Definitions:

Releasing Hormones

Hormones produced by the hypothalamus that stimulate or inhibit the release of hormones from the anterior pituitary gland.

Hypothalamus

A small region at the base of the brain responsible for hormone production and regulation of vital bodily functions, including temperature, thirst, hunger, sleep, and emotional activity.

Pituitary

A small, pea-sized gland located at the base of the brain, often termed the "master gland" because it secretes hormones that regulate other glands and many body functions including growth, reproduction, and metabolism.

Medial Forebrain Bundle

A neural pathway in the brain involved in the regulation of reward, pleasure, and addiction.