Use the following to answer question:
Table 12.20
-(Table 12.20) Payoffs represent profits in millions of dollars. Which of the following statements is (are) TRUE?
A) I and III
B) II
C) II and III
D) I, II, and III

Question

Use the following to answer question:
Table 12.20 
-(Table 12.20) Payoffs represent profits in millions of dollars. Which of the following statements is (are) TRUE? 
A) I and III 
B) II 
C) II and III 
D) I, II, and III

Quizplus · Accepted Answer

From the table, it can be seen that Company A has the highest payoff of $6 million if they advertise and Company B does not, while Company B has the highest payoff of $8 million if they advertise and Company A does not. Therefore, both companies have an incentive to advertise, resulting in a Nash equilibrium (option II). Additionally, if both companies advertise, they both receive a payoff of $5 million (option III). However, option I is not true as it suggests that both companies would have a higher payoff if neither advertises, which is not the case.

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