If You Advertise and Your Rival Advertises,you Each Will Earn

question 113

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 hand your business down to your children (and this "bequest" goes on forever) ,then a Nash equilibrium is for each firm to:

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

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