If You Advertise and Your Rival Advertises, You Each Will

question 49

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. If you and your rival plan to be in business for only one year, the Nash equilibrium is:

• A) for each firm to advertise.
• B) for neither firm to advertise.
• C) for your firm to advertise and the other not to advertise.
• D) None of the answers is correct.

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Definitions:

External Locus of Control

The belief that one's outcomes in life are determined by external forces or events outside their control, as opposed to being the result of their own actions (internal locus of control).

Path-goal Theory

A leadership theory that emphasizes the leader's role in guiding and motivating followers to achieve set goals by clarifying the path to these goals.

Path-goal Theory

A leadership theory that suggests the leader's job is to assist followers in attaining their goals and to provide the necessary direction and support.

Path-goal Theory of Leadership

A theory that suggests a leader's behavior is contingent to the satisfaction, motivation, and performance of their subordinates, emphasizing the need to adapt leadership style to the situation.