Refer to the Normal-Form Game of Advertising Shown Below

question 16

Multiple Choice

Refer to the normal-form game of advertising shown below. Suppose there is a 10 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm A of agreeing to the strategy {do not advertise, do not advertise}?

• A) $125
• B) $237.50
• C) $1,250
• D) None of the answers is correct.

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Definitions:

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